Lack of surprise exam could lead to enforcement (ThinkAdvisor)

Over the course of six years, a New York-based RIA neglected to arrange surprise exams to meet their custody rule requirement. The SEC decided that warranted an enforcement action resulting in a $50,000 fine. FrontLine Compliance Founder and President Amy Lynch comments that it is unusual for this type of violation to go to enforcement. She explains that the firm did not understand the rule applied to them or ignored its requirement, so it never had the exams conducted and failed to comply for several years. The SEC viewed that as a more serious deficiency, stating that while no investor harm and client losses occurred, this type of technical compliance violation represented a standalone enforcement action. See ThinkAdvisor, “SEC Fines RIA for Failing to Conduct Surprise Exams”