The final point I want to discuss is the SEC staffing. In February announced plans to add 100 investment adviser examiners by October of this year. They are using a combination of new examiners and transferring staff from the broker dealer area. This increase in staff will allow the SEC to increase the number of investment adviser exams it conducts. However, it will take some time to see the effect because new examiners will need to be trained.

Now I'd like to go over some enforcement actions of note. The majority of examinations results in a deficiency letter, and even many of those that are referred to the branches of enforcement do not actually result in an enforcement action. There are some reason enforcement actions where some of the findings stemmed from an examination. The first has to do with recidivist violations.

Trust and investment advisers were cited by OC examiners in 2005 and 2007 for failure to complete an annual compliance review or develop a compliance manual. Again they were examined in 2011 and the same deficiencies were noted amongst other things. Since trues and investment advisers failed to take corrective action, what was a deficiency rose to the level of enforcement. As a result of the action, the firm must engage in independent compliance consultant for at least three years to conduct this annual review. Also the firm and the Chief Executive Officer had to pay a $50,000 penalty, and the Chief Compliance Officer was fined $10,000.

The second case is a pending action regarding failure to produce documents and share class recommendations amongst other things. Stephen Allison was a sole owner and Chief Compliance Officer of Allison, LLC. As part of an exam in April 2014, the exam staff sent a written request for certain basic records. Mr. Allison failed to provide the requested documents, the staff made several additional attempts to gather the documents. Mr. Allison still failed to produce the majority of them.

Mr. Allison was also a registered representative of a broker dealer and invests their client in mutual fund shares with 12b-1 fees of which he received a portion, while alternative share classes with lower fees were available. Mr. Allison is charged for failing to make certain books and records available to the SEC, and engaging in fraudulent and deceptive business practices amongst other things. This case shows the importance of responding fully to a document request list, and also the types of enforcement actions we may see as a result of the current share class initiative.

In the final action, Louis Blazer, a Blazer Investment Advisers took 2.35 million dollars from five clients in non-authorized transactions to invest in two movie projects in which he had a financial interest. He further lied to the exam staff when they questioned this suspicious transactions. Mr. Blazer claims that the transactions were approved by clients and fabricated documents to support this statement. He has been barred from the industry and has agreed to a settlement which is still pending court approval. While this case appears to be outright fraud, it does show how important it is to be upfront with the exam staff.