Three registered investment advisers ("RIAs") agreed to settle separate SEC charges that they failed to implement compliance procedures designed to prevent securities law violations.  SEC Enforcement's Asset Management Unit brought this action after working closely with agency examiners to ensure that viable compliance programs are in place at firms. By law, RIAs are required to adopt and implement written compliance policies and procedures.  They're also required to correct any deficiencies that are identified by SEC examiners.  The SEC apparently has adopted a "zero tolerance" policy for dealing with any  RIAs that ignore warnings brought up during SEC examinations. Three Separate Cases. In today's announcement, the SEC charged 3 firms with compliance failures in separate cases:

• UT-based OMNI Investment Advisors Inc.
• MN-based Feltl & Company Inc.
• MI-based Asset Advisors LLC.

Gary Beynon, OMNI's owner, also was charged.  He served as the firm's CCO despite living in Brazil and performing virtually no compliance responsibilities. Feltl & Company, Asset Advisors, and Beynon each will pay financial penalties and institute a series of corrective measures to settle the SEC’s charges. OMNI and Asset Advisors each received previous warnings about their compliance deficiencies from SEC examiners. Compliance Rule 206(4)-7, of the Investment Advisers Act. This rule obligates RIAs to adopt and implement WSPs that are reasonably designed to prevent, detect, and correct securities law violations.  The Rule also requires RIAs to annually review these pols and procedures for continued adequacy and effectiveness.  The Rule further requires designation of a chief compliance officer (CCO) who's responsible for administering the pols and procedures. “The failure to adopt and maintain adequate compliance policies and procedures is a significant violation of the federal securities laws. We will continue to work with our counterparts in the national exam program to identify investment advisers that put their investors at risk by failing to take their compliance obligations seriously.” --  Robert Kaplan, Co-Chief of the SEC Division of Enforcement’s Asset Management Unit. Case 1.  OMNI Investment Advisors, Gary Beynon. Firm allegedly failed to adopt and implement WSPs after SEC examiners informed OMNI of its deficiencies. Between September 2008 and August 2011, OMNI had no compliance program and its advisory reps were completely unsupervised.  Beynon assumed the CCO responsibilities in November 2010 while living abroad.

Among other things, OMNI:  (i) failed to establish, maintain, and enforce a written code of ethics;  (ii) failed to maintain and preserve certain books and records. In response to a subpoena, OMNI produced client advisory agreements with Beynon’s signature evidencing his supervisory approval when, in fact, Beynon had never reviewed the agreements. Beynon backdated his signature on those agreements one day before the documents were produced to the Commission.

Sanctions. Beynon agreed to pay a $50K fine, and agreed to be permanently barred from acting within the securities industry in any compliance or supervisory capacity and from associating with any investment company.  Finally, OMNI agreed to provide a copy of the proceeding to all of its former clients during the relevant period.

2.  Feltl & Company, Inc. Feltl & Company allegedly failed to adopt and implement WSPs for its growing advisory business, and further neglected to adopt a code of ethics and collect the required securities disclosure reports from its staff.  As a result of its compliance failures, Feltl engaged in hundreds of principal transactions with its advisory clients’ accounts without informing them or obtaining their consent as required by law. Feltl also improperly charged undisclosed commissions on certain transactions in clients’ wrap fee accounts.

Sanctions. Feltl & Company agreed to pay a $50K fine, and return over $142K to certain advisory clients.  Firm will hire an independent consultant to review its compliance operations annually for 2 years, and will provide a copy of the SEC’s order to past, present and future clients, and prominently post a summary of the order on its website.

3.  Asset Advisors LLC. Asset Advisors, allegedly had failed to adopt and implement a compliance program.  After SEC examiners brought it to the firm’s attention, Asset Advisors adopted policies and procedures but never fully implemented them.  Similarly, Asset Advisors only adopted a code of ethics at the behest of the SEC exam staff and then failed to adequately abide by the code.

Sanctions. Asset Advisors agreed to pay a $20K fine, cease operations, de-register with the Commission, and - with clients’ consent - move advisory accounts to a firm with an established compliance program.

For further details, go to:   [SEC PR 11-248, 11/28/11]. Also refer to:   [SEC Order Against Asset Advisers],  [SEC Order Against Fetl & Co.], and   [SEC Order Against OMNI and Beynon].