A Colorado-based investment advisory firm has been fined $200,000 and ordered to improve its compliance practices regarding the purchase of securities on behalf of certain institutional investors.
First Western Capital Management Co., based in Denver, will also be censured and is subject to a cease-and-desist order on similar purchases, although the company will not have to admit to any wrongdoing, according to a Securities and Exchange Commission administrative proceeding filed Thursday.
The SEC says from 2010 through 2017, First Western “failed reasonably to supervise its investment adviser representatives” when it allowed them to purchase $666 million worth of securities—comprising about 9 percent of all securities purchased by the firm during that time period—for clients that were not qualified institutional buyers under Rule 144A of the Securities Act of 1933.
In addition, the firm “failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940 and the rules thereunder by the adviser and its supervised persons.”
“For a period of time prior to 2017, First Western Capital Management misinterpreted Rule 144A of the Securities Act of 1933 and purchased, for client accounts, unregistered securities,” First Western Financial said in an emailed statement. ”The issue was discovered by First Western Capital Management during an internal review in 2017 and corrective measures were put in place at that time. A review of the impacted accounts showed no client accounts suffered financial harm.”
According to the SEC order, First Western “willfully” violated the Investment Advisors Act because “investment advisers are responsible for supervising, with a view to preventing violations of the federal securities laws, persons subject to their supervision.” The SEC said the firm’s failures were in part due to “inadequate training, compliance policies and procedures and supervision” and that the firm “failed to establish policies and procedures which would reasonably be expected to prevent and detect such violations.”