SEC Scrutinizing RIAs at a Higher Level

Recent Securities and Exchange Commission (SEC) enforcement results for the 2016 fiscal year have shown that the agency has taken its scrutiny of registered investment advisers (RIAs) to a whole new level. The SEC said it brought 160 cases against investment advisors or investment companies, which is a record and the highest number of independent or standalone cases involving these groups, at 98, for fiscal year 2016, ending September. The SEC filed 868 enforcement actions during the year, up from 807 in fiscal year 2015 and 755 in fiscal year 2014. But the SEC didn’t order as much in penalties, with disgorgement and penalties totaling over $4 billion, compared to $4.19 billion last year and $4.16 billion the year prior.

The SEC charged Aequitas Capital Management for making bad bets on student loans and for concealing its deteriorating financial conditions while still raising more than $350 million from 1,500 investors. They also sanctioned three former AIG independent broker/dealers, Royal Alliance Associates, SagePoint Financial and FSC Securities for recommending clients invest in more expensive mutual fund share classes to increase their fees. The SEC also charged 13 investment advisors in late August including AssetMark, Banyan Partners and Constellation Wealth Advisors for repeating the false claims of F-Squared Investments. The SEC charged F-Squared with misrepresenting performance data for its flagship AlphaSector.

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