Welcome to the May 2025 edition of our Enforcement Actions Roundup for registered investment advisers (RIAs) and wealth managers covering March and April. Like our enforcement actions recap for financial institutions (FIs), the Wealth Management Enforcement Actions Roundup will offer a deep dive into the latest enforcement actions, covering insights and key takeaways for RIAs.
Let’s get started.
2025 Wealth Management Enforcement Actions Tracker*
| Jan | Feb | Mar | Apr | May | Jun | Jul | Aug | Sept** | Oct | Nov | Dec | |
| AML and OFAC Monitoring | 3 | -- | -- | -- | ||||||||
| Best Execution | -- | -- | -- | -- | ||||||||
| Compliance Programs Effectiveness | 8 | -- | 1 | -- | ||||||||
| Conflicts of Interest | 1 | 1 | 1 | -- | ||||||||
| Crypto Assets - Products and Services | -- | -- | -- | -- | ||||||||
| Cybersecurity | 1 | -- | -- | -- | ||||||||
| Fees and Expenses | 1 | 1 | -- | -- | ||||||||
| Fiduciary Standards of Conduct Related to Investment Advice | 2 | 1 | 2 | -- | ||||||||
| Financial Responsibility Rules | -- | -- | -- | -- | ||||||||
| Form CRS | -- | -- | -- | -- | ||||||||
| Other | 8 | -- | 2 | -- | ||||||||
| Private Fund Advisers | -- | -- | 1 | -- | ||||||||
| Reg S-ID and Reg S-P | 1 | -- | -- | -- | ||||||||
| Regulation Best Interest and Suitability | -- | 1 | -- | -- | ||||||||
| Shortened Settlement | -- | -- | -- | -- | ||||||||
| Trading-Related Practices and Services | 4 | -- | 1 | -- |
*Please note that a single enforcement action may be included under multiple topics.
**SEC’s fiscal year ends September 30
SEC Enforcement Actions
SEC Charges RIA and Officers $500K in Penalties for Breaching Fiduciary Duties
- Exam Priority: Compliance Programs Effectiveness; Conflicts of Interest; Fiduciary Standards of Conduct Related to Investment Advice, Private Fund Advisers; Other
- Topic: Compliance Programs; Audit Requirements
- Regulation: Rules and Regulations, Investment Advisers Act of 1940 - Ncontracts
- Enforcement Action
- Date: March 7, 2025
The SEC filed settled charges involving breaches of fiduciary duties against a registered investment adviser (RIA), its former Chief Operating Officer (COO), and its former managing partner. The breaches involved a private fund advised by the RIA and managed by the former officers/partners. The Chief Operating Officer (COO) misappropriated approximately $223,000 for personal expenses, including travel, while the managing partner, despite red flags indicating the misappropriation, failed to reasonably supervise the COO’s activities. In addition, the managing partner caused the private fund to pay a business debt it shouldn’t have; the RIA failed to have the fund audited as required; and the RIA failed to adopt and implement adequate policies and procedures. As a result, the RIA agreed to a $235,000 civil penalty; the COO agreed to a $200,000 civil penalty and associational bar; and the managing partner agreed to an $80,000 civil penalty and 12-month supervisory suspension.
Takeaways
Red flags serve as rumble strips for compliance personnel. Functioning compliance programs generate red flags. Effective compliance programs investigate red flags, decide what actions, if any, are needed, and document the decisions. Never (or rarely) seeing a red flag doesn’t mean your compliance program is watertight. It means your program may not adequately reflect your firm’s real-world risks — especially those involving conflicts of interest. (Conversely, too many red flags can mean the same thing.) In this enforcement case, the red flags might have been investigated if a compliance officer (instead of the private fund’s co-manager) had been responsible for reviewing them.
SEC Charges Investment Advisory Firm with Antifraud Violations
- Exam Priority: Fiduciary Standards of Conduct Related to Investment Advice; Trading-Related Practices and Services; Other
- Topic: Compliance Programs; Fraud; Investment Policy Statements
- Regulation: Rules and Regulations, Investment Advisers Act of 1940 - Ncontracts; Rules and Regulations, Investment Company Act of 1940 - Ncontracts
- Enforcement Action
- Date: March 17, 2025
The SEC filed charges against an investment advisory firm for violations of the antifraud and other provisions of federal securities laws, including the Investment Advisers Act and the Investment Company Act. The charges involve misconduct and investing more than 25% of a fund’s assets in a single company. The firm settled charges with the SEC in November 2021 for the same conduct, which continued despite being ordered to stop. The firm violated the 25% industry concentration limit and then misrepresented it for years. In addition, the investment adviser withheld key information from the fund’s board and did not operate with the required independence. The SEC’s complaint seeks permanent injunctive relief, return of ill-gotten gains, and civil penalties.
Takeaways
Investment Policy Statements (IPS) carry tremendous weight; they serve as the written governing document of a client’s financial relationship with your firm. Not adhering to the IPS tenets puts your firm in legal and regulatory jeopardy — even if the client profits. Track all Investment Policy Statements and have a system in place to notify you if a client’s portfolio is out of compliance. Meticulously document any changes and obtain the client’s written consent and/or approval. Finally, no Investment Policy Statement is 100% evergreen. Consider reviewing the IPS in conjunction with the client’s regular and/or periodic investment objective review.
Announced Initiatives and Sweep Exams
There were no announced initiatives or sweep exams in March or April.
Learn more about the risks facing RIAs and wealth management firms in our guide to emerging risks in the securities industry.
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Wealth Management Enforcement Action Roundup: January & February 2025
Enforcement Actions Roundup: April 2025
