SEC Sanctions Two Investment Advisers for Impeding Examinations (with Lofchie Comment)

The SEC sanctioned two investment advisory firms for impeding examinations conducted by SEC staff. First, the investigation found that Evens Barthelemy and his New York-based firm Barthelemy Group LLC, misled SEC examiners by inflating the firm’s claimed assets under management (AUM) tenfold in an apparent attempt to show that the firm was eligible for SEC registration. Second, the SEC found that Seth Richard Freeman and his San Francisco-area firm, EM Capital, delayed nearly 18 months in producing books and records related to the firm’s mutual fund advisory business. Both firms agreed to settle the SEC’s charges against them.

Lofchie Comment: Leaving aside the fact that these guys did a bad thing, it is interesting that the objective of their crime was to register with the SEC. This is not exactly the same thing as breaking into jail. I wonder if they wanted to register with the SEC because they thought this gave them credibility with clients, because they thought that the SEC was more liberal than state regulators, or because they thought the burdens of registering with multiple state regulators were too great (though according to the SEC's press release, the firm would only have been required to register in three states, which is not so many). While I understand (and generally agree with) the reason we only permit large firms to register with the SEC, it does mean that we burden smaller advisers with being subject to regulation in multiple jurisdictions, which is unfair in that it subjects smaller advisers to greater regulatory expenses.

View Orders: Evens Barthelemy and Barthelemy Group LLC; EM Capital Management, LLC and Seth Richard Freeman.See also: Press Release.