SEC Sweep Finds Advisers Failed to Comply with Custody Requirement

The SEC settled charges with nine investment advisers following a targeted sweep to evaluate compliance with Advisers Act Rule 206(4)-2 (the "Custody Rule") and related Form ADV requirements.

In the Orders, the SEC found that the advisers failed to, among other things, (i) have audits performed, or deliver annual audited financial statements for private funds they advised in accordance with the Custody Rule, or (ii) comply with related Form ADV reporting and amendment obligations.

To settle the charges, each of the advisers agreed to (i) cease and desist, (ii) a censure and (iii) a civil monetary penalty.

In a press release relating to the sweep, the SEC encouraged advisers "to ensure their compliance with the Custody Rule and the related Form ADV reporting and amending obligations." The SEC reminded advisers that, in accordance with the instructions to Form ADV, Part 1A, Schedule D, Section 7.B.23.(h), "if you check 'Report Not Yet Received,' you must promptly file an amendment to your Form ADV to update your response when the report is available."