The SEC Fines Firm $300,000 for ADV Deficiencies


The Securities and Exchange Commission (SEC) has fined a registered investment advisor that acts as a subadvisor to clients in various wrap fee programs $300,000. The SEC felt the firm, RiverFront Investment Group, violated Sections 207 and 204 of the Investment Advisers Act of 1940 and Rule 204-1(a) by making misleading disclosures in its Forms ADV and failing to prepare its customers for additional costs beyond the “wrap fees”.

The SEC charged that the advisor inaccurately portrayed “the frequency that it traded in a manner that resulted in additional, insufficiently disclosed transaction costs to advisory clients in wrap fee programs that were not covered by the annual wrap fee”.

The Investment advisor firm agreed to settle without admitting or denying the SEC’s charges.

“Investors were misled about the overall cost of selecting RiverFront to manage their portfolios,” said Sharon Binger, Director of the SEC’s Philadelphia Regional Office.  “Investors in wrap fee programs pay one annual fee for bundled services without expecting to pay more, so if subadvisers like RiverFront trade in a way that incurs additional costs to clients, those costs must be fully and clearly disclosed upfront so investors can make informed investment decisions.”

This case highlights the seriousness with which SEC Examiners will review your business including your ADV form during an Exam.

For more tips on how to prepare for your next ADV Exam join us and North Point Compliance on our August 17 Webinar, “SEC Exam Success with the Ex-Examiners”

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