SEC Charges Five Advisory Firms for Rule Violations

The Securities and Exchange Commission (SEC) has announced charges against five investment advisers for their failure to comply with regulations related to the safeguarding of client assets. Additionally, three of the firms faced charges for not promptly updating SEC disclosures concerning audits of their private fund clients' financial statements. As part of settlements, all five advisory firms have agreed to pay a combined total of over $500,000 in penalties.

According to the SEC's orders, these firms were found to have violated one or more of the following requirements:

• Failure to have audits conducted.
• Delays in delivering audited financials to investors.
• Lack of assurance that a qualified custodian was maintaining client assets.

Furthermore, the SEC's orders revealed that two of the firms failed to promptly file amended Forms ADV to indicate that they had received audited financial statements. Additionally, one of the firms did not accurately describe the status of its financial statement audits over multiple years when filing its Form ADV.

Andrew Dean, Co-Chief of the SEC Enforcement Division's Asset Management Unit, emphasized the significance of the Custody Rule and Form ADV reporting obligations, stating that these rules are essential for investor protection. He also affirmed the SEC's commitment to ensuring that private fund advisers fulfill their responsibilities in securing client assets.

Without admitting or denying the findings, the five firms have agreed to be censured, cease and desist from violating the respective charged provisions, and payment of civil penalties ranging from $50,000 to $225,000.

This enforcement action marks the second round of cases initiated by the SEC in response to a targeted sweep focused on violations of the Investment Advisers Act's Custody Rule and Form ADV requirements by private fund advisers. The SEC's action follows a similar case in September 2022, in which nine advisory firms faced charges related to similar violations.

The five advisory firms involved in the enforcement actions are:

1. Lloyd George Management (HK) Limited
2. Bluestone Capital Management LLC
3. The Eideard Group, LLC
4. Disruptive Technology Advisers LLC
5. Apex Financial Advisors Inc.