US SEC cracks down on advisers over repeated compliance failures

Reuters

By Sarah N. Lynch

WASHINGTON, Oct 23 (Reuters) - Three investment advisers andtheir owners agreed on Wednesday to settle civil charges thatthey had repeatedly failed to address compliance problems, in acase that stems from a broad crackdown by U.S. regulators intocompliance failures by asset managers.

The U.S. Securities and Exchange Commission said that Modern Portfolio Management Inc., Equitas Capital Advisers LLC, andEquitas Partners LLC would each pay financial penalties and hirecompliance consultants to resolve the charges.

The case was brought by a unit in the SEC's enforcementdivision that specializes in asset management, one of severalspecialized areas created in the wake of the financial crisisand the Bernard Madoff Ponzi scheme.

The unit has stood out for its approach to pursuing cases,which has involved a mix of responding to referrals fromexaminers and broader initiatives that look for compliancefailures in high-risk areas like fee arrangements, boardgovernance and conflicts of interest.

The SEC said Wednesday's case stems from an initiativelaunched two years ago that targets repeat offenders who fail tofix compliance problems identified by SEC examiners.

The firms charged had compliance programs that "were notadequate to prevent misleading statements in marketing materialsor inadvertent overbilling of clients," said Andrew Ceresney, aco-director of the SEC's enforcement division.

Modern Portfolio Management and its owners, G. ThomasDamasco II and Bryan Ohm, agreed to pay $175,000 and to undergocompliance training.

The SEC also sanctioned Equitas Capital Advisers and EquitasPartners, owner David S. Thomas, Jr., chief compliance officerSusan Christina, and former owner and chief compliance officerStephen Derby Gisclair.

Equitas Capital Advisers and Crescent Capital ConsultingLLC, an advisory firm opened by Gisclair in 2010, were bothordered to repay clients who were overbilled.

Equitas Capital Advisers, Thomas and Gisclair also agreed topay a total of $225,000 in additional penalties.

An attorney for Modern Portfolio Management Inc. and itsowners declined to comment.

Attorneys for the other defendants could not be immediatelyreached for comment.

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