Investment Adviser Fraud

Under the Dodd-Frank Act, whistleblowers may receive a reward for reporting original information to the U.S. Securities and Exchange Commission (“SEC”) about violations of federal securities laws, including investment adviser fraud. In a recent speech, the director of the SEC Office of Compliance Inspections and Examinations revealed that the agency has increased staffing in the Investment Adviser/Investment Company (“IA/IC”) Examination Program by 20%. This expansion confirms the SEC’s continued focus on investigations and enforcement actions related to investment adviser fraud, such as:

• misleading fee agreements
• overcharging clients
• failing to disclose conflicts of interest
• improper allocation of expenses
• false advertising of performance
• “parking” schemes

The SEC regulates investment advisers primarily under the Investment Advisers Act of 1940 and the rules adopted under that statute. The SEC frequently initiates enforcement actions for common investment advisor violations.