Managing money is hard enough. Then comes the sales and marketing part......and the temptation to overstate your performance and assets is just too much for some.
A recent settled administrative action by the SEC is illustrative. The adviser had only $4 million AUM, but wanted to appear larger. So he registered his firm federally with the SEC: big No-No!
In its action,the SEC asserted that the adviser filed multiple Form ADVs stating that it had $200 Million in AUM and was thus eligible for SEC registration as an adviser even though the firm had only $4 Million in AUM. What's worse is that the misrepresentation led clients to invest with the adviser who then stole from them. As a result, the adviser was charged with misappropriating client assets, failing to comply with the Advisers Act's custody and recordkeeping rules, and charging excessive fees.
Posted by Karl Hartmann, July 1, 2017