The SEC has charged three investment advisors — OMNI Investment Advisors, Feltl & Company and Asset Advisors LLC — for failing to implement compliance procedures to prevent securities law violations. OMNI’s owner, Gary R. Beynon, was also charged.
The firms were in violation of the Investment Advisors Act’s “compliance rule,” which requires registered investment advisors to implement written policies and procedures to prevent, detect and correct securities laws violations. It also requires an annual review of the policies and procedures and the designation of a chief compliance officer to administer them.
“The failure to adopt and maintain adequate compliance policies and procedures is a significant violation of the federal securities laws,” said Robert Kaplan, co-chief of the SEC Enforcement Division’s Asset Management Unit, in a press release.
The cases are the result of stepped-up efforts within the SEC’s Enforcement Division to work with agency examiners to ensure that viable compliance programs are in place to prevent investor harm.
To settle the charges, Beynon agreed to pay a $50,000 penalty. He also agreed to be permanently barred from acting within the securities industry in any compliance or supervisory capacity and from associating with any investment company. In addition, OMNI agreed to provide a copy of the proceeding to all of its former clients between September 2008 and August 2011, a period when OMNI had no compliance program and its advisory representatives were unsupervised.
“I regret the oversight of the compliance issues but [am] glad that no clients were harmed,” Beynon said.
To settle its compliance failures, Feltl & Company agreed to pay a penalty of $50,000 and return more than $142,000 to certain advisory clients. Additionally, the firm will hire an independent consultant to review its compliance operations annually for two years, provide a copy of the SEC’s order to past, present and future clients, and post a summary of the order on its web site.
Chet Taylor, general counsel for Feltl & Co., noted that the company is primarily a stock brokerage firm and that it had the same set of procedures to govern both the brokerage and advisory business. “It was the SEC’s position that we should have had separate and enhanced procedures in place [for the advisory business],” he said, which the firm now has.
Asset Advisors, which was charged with failing to adopt and implement a compliance program, agreed to pay a $20,000 penalty, cease operations, de-register with the Commission, and — with clients’ consent — move advisory accounts to a firm with an established compliance program.
“We had a compliance service on retainer to keep our firm out of hot water but it wasn’t enough,” said Carl Gill, owner of Asset Advisors, adding that in his view the SEC was being overly aggressive in prosecuting firms in the post-Madoff era. “There were no customer complaints, no malfeasance, no overcharging of fees,” he said, noting that he runs a one-man shop.
The three firms and Beynon did not admit or deny the allegations. In addition to the penalties, they all consented to cease-and-desist orders and agreed to be censured.