Six investment adviser violations make up roughly 60% of all deficiencies the SEC’s staff find when they investigate adviser offices, according to Renee Esfandiary, assistant director of the SEC’s Office of Compliance, Inspections and Examinations. The investment adviser violations include:

Compliance Rule

Violations include not have written policies and procedures to ensure firm operations adhere to all adviser regulations, not following the firm’s own policies and procedures, or not having a chief compliance officer responsible for administering them.


Violations can occur when advisers fail to update their registration form ADV timely, file it with incorrect information, or do not provide clients or prospective clients with certain information at required times.

Fiduciary Duty

Investment adviser violations occur a when an adviser fails to act in a client’s best interest, such as using client assets for an adviser’s own benefit or for the benefit of another client. This can constitute fraud. Part of this responsibility requires advisers to disclose any conflicts of interest.

Code of Ethics

Advisory firms must enforce a code of ethics that describes standards of business conduct, including personal securities trading of its employees, officers, directors and other people the firm is required to supervise.

Advertising Rule

Forbidden advertisements include communications with false or misleading statements, those that contain any untrue statement of fact, and those that don’t include necessary documentation to prevent the communication from being misleading. Susceptible areas are compliance with GIPS (global investment performance standards) and construction and calculation of performance composites.


Advisers deemed to have custody of client assets must be subject to an annual surprise examination of those assets by an independent public accountant so investors have verification of their assets as a safeguard against misuse. Violations include failure to have the exams done and not delivering financial statements on time.

If you or someone you know has lost money as a result of an investment or Ponzi scheme, please contact Richard Frankowski at 888-741-7503 to discuss your potential legal remedies or complete the contact form.