A recently announced SEC cease and desist order that included a $150,000 penalty reiterates the importance the SEC places on registered investment advisers’ responsibility to adopt and implement compliance programs designed to prevent violations of the Investment Advisers Act of 1940.

The advisor in question, who had previously been cited over several years for multiple compliance failures from three previous examinations and one previous enforcement action, repeatedly failed to comply with Section 206(4) of the Advisers Act and Rule 206(4)-7. These rules require investment advisors to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act, and requires advisors to review annually the adequacy of those compliance policies and procedures and the effectiveness of their implementation.

Among the current compliance failures, the cease and desist order alleged that the advisor failed to:

(1) implement its policies and procedures to ensure that its Form ADV Part 2A (“brochure”) was accurate and current; 

(2) enter into written investment advisory agreements with all of its clients as required by its own compliance manual;

(3) comply with the client fee table as stated in its brochure, and in fact charged some clients fees higher than those published in the fee table; 

(4) keep a record of dates on which it delivered its Form ADV Part 2 to new and prospective clients, in violation Section 204 of the Advisers Act; and          

(5) perform annual compliance reviews for several years. 

The cease and desist order described that the advisor was on notice of its compliance program deficiencies and had made previous commitments to improvement. It is also notable that the order does not reference any specific client complaints, suggesting the importance of the requirements, with or without clients complaining. 

In addition to the $150,000 penalty, the SEC censured the advisor and the advisor is responsible for the expense of retaining an independent compliance consultant charged with reporting to the Commission its findings on the advisor’s compliance with the several remediation directives prescribed by the order.

This order, along with the Commission’s publication of its 2026 exam priorities, serves as a useful reminder of the importance of establishing, implementing, and maintaining a compliance program as required under the Adviser Act.