Adviser Found to be Unable to Rely Upon Adviser Exemption and Commit Other Violations

July 25, 2017

The SEC brought an enforcement action against Bradway Financial, LLC, a SEC-registered investment adviser, Bradway Capital, LLC, an investment adviser that claimed to be exempt from registration, and Case, the managing member, sole owner, and CCO of both Bradway Financial and Bradway Capital.

The SEC found that Bradway Capital was not entitled to rely on the private fund adviser exemption from registration in Rule 203(m)-1 under the Advisers Act and did not otherwise qualify for an exemption from SEC registration. The SEC further found that Bradway Capital provided statements to investors that reflected inflated values for investments held in two hedge funds that it advised. These inflated values were also included in Forms ADV filed with the SEC by Bradway Capital and Bradway Financial and signed by Case. In addition, the SEC found that Bradway Capital and Bradway Financial failed to comply with the Advisers Act’s custody and compliance rules.

The SEC found further violations.  It stated that the firms improperly used fund assets to pay legal fees that the firms incurred in connection with the SEC’s investigation. It also stated that Bradway Financial contracted to earn a performance fee for managing a fund, without determining whether the fund’s investors were qualified clients. Lastly, the SEC stated that Case aided and abetted and caused Bradway Capital’s and Bradway Financial’s violations, and Bradway Financial aided and abetted and caused Bradway Capital’s violations, of various provisions of the Advisers Act and the rules thereunder.

Click here to access the enforcement action.