New York Investment Adviser Settles SEC Allegations for $100,000

New York-based investment adviser, Mortgage Industry Advisory Corp. (MIAC), has agreed to a settlement of $100,000 with the U.S. Securities and Exchange Commission (SEC) over allegations of failing to implement proper compliance measures, conduct annual reviews, and establish and enforce a code of ethics.

The SEC announced the settlement in an administrative proceeding on Monday, including MIAC's commitment to cease and desist from further violations and a censure.

The case stems from issues dating back to 2006 when MIAC received a notice from the SEC's Division of Examinations highlighting deficiencies in its employee handbook. The guidance provided was primarily related to internal human resources policies and did not address the prevention of employees from violating federal securities laws, according to the SEC's order.

Specifically, the handbook failed to mention the Advisers Act and lacked code of ethics requirements. Although MIAC had initially committed to including a code of ethics in its handbook, it was still absent upon examination in 2008.

The SEC alleged that from 2006 until 2022, MIAC failed to conduct annual reviews to assess the adequacy and effectiveness of its compliance program's implementation. Despite having engaged an accounting firm since 2001 to review the design and effectiveness of its internal controls on an annual basis, MIAC had not extended this review to its compliance program.

It was only after a 2021 examination revealed the same deficiencies identified in 2006 that MIAC took corrective action. The firm implemented new policies and procedures, commenced conducting annual compliance reviews, and adopted a written code of ethics, the SEC reported.

In 2022, MIAC made further strides in bolstering its compliance program by hiring a new chief compliance officer with the task of enhancing the firm's adherence to regulatory requirements. Additionally, the company retained a third-party compliance consultancy to provide guidance on its overall compliance program, as well as its policies and procedures.

MIAC chose to settle with the SEC without admitting or denying the findings. The company did not immediately respond to requests for comment.

The settlement serves as a reminder to investment advisers and financial institutions of the importance of robust compliance measures, including regular reviews and adherence to codes of ethics, to ensure they meet regulatory requirements and maintain the integrity of the financial markets.

By fLEXI tEAM