The Securities and Exchange Commission last week suspended for one year the former president of an investment advisory firm over claims that he consistently dedicated insufficient resources to the firm’s chief compliance officer, which contributed substantially to various compliance failures.
As part of the settlement, Ron Strauss, president of registered investment adviser Pekin Singer until last year (he is now a senior adviser to the firm), will pay a civil penalty of $45,000. In addition, the firm will pay a $150,000 civil penalty, while two of its former executives will pay a penalty of $45,000 each.
According to the SEC’s June 23 order, “Pekin Singer failed to conduct timely annual compliance program reviews in 2009 and 2010 and failed to implement and enforce provisions of its policies and procedures and Code of Ethics during this same period.”
Even though, Strauss knew that the CCO had little compliance experience when he filled the role in 2007, Strauss failed to provide the CCO with staff to assist him with compliance responsibilities, “other than the prior CCO, who was then part-time and was serving in an advisory capacity,” the SEC stated.
The SEC also faulted Pekin Singer for failing to conduct timely compliance program reviews, even after the CCO alerted Strauss that the compliance program and testing needed further improvement. The CCO, himself, “lacked experience, resources, and knowledge as to how to adopt and implement an effective compliance program or how to conduct a comprehensive and effective annual compliance program review,” the SEC order stated.
According to the SEC, Strauss chose not to make compliance a priority. Instead, he directed the CCO to focus on his investment research and other non-compliance responsibilities instead.
Throughout 2009 and 2010, Pekin Singer did not adequately evaluate the effectiveness of its compliance policies and procedures and code of ethics or test the firm’s implementation,” ignoring multiple pleas for help by the CCO.
Pekin Singer did not engage a compliance consultant to assist the CCO until 2011. After that time, the SEC discovered that “several violations of Pekin Singer’s policies and procedures and Code of Ethics” had occurred between 2009 and 2011 that were not detected until the compliance consultant and an SEC staff examination assessed Pekin Singer’s compliance program.