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Written by 4:49 pm Blog, Securities Fraud Articles

SEC Issues Risk Alert to Investment Advisory Firms

According to the Securities and Exchange Commission, the Office of Compliance Inspections and Examinations (OCIE) recently issued a Risk Alert on the due diligence process used by investment advisers when recommending alternative investments to clients. Alternative investments include such products as hedge funds, private equity funds, or funds of private funds.

OCIE examined several advisory firms and observed the following deficiencies:

· Omitting alternative investment due diligence policies and procedures from their annual reviews, even though these investments comprised a large portion of certain advisers’ investments on behalf of clients

· Providing potentially misleading information in marketing materials about the scope and depth of due diligence conducted

· Having due diligence practices that differed from those described in the advisers’ disclosures to clients.

Alternative investments are extremely complex high risk investment products that are often exempt from registration with the SEC, and therefore lack regulatory oversight. The vast majority of alternative investments are intended for institutional investors and not appropriate most retail investors.

Compliance with existing regulations include adequate investigation in to a potential clients profile to determine if a particular investment is appropriate given the clients age, financial objectives, net worth, investment experience and risk tolerance among other factors. In addition investment advisers have a fiduciary duty to make investment recommendations that are in the best interests of the client and inform clients of any conflicts of interest.

Investment advisors that make unsuitable investment recommendations or over-concentrate a client’s portfolio with alternative investments may be liable for investment losses.

If you suffered significant financial losses as a result of alternative investment recommendations and would like to speak with a securities attorney, please call The White Law Group at (312)238-9650 for a free consultation.

The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Boca Raton, Florida.

For more information on The White Law Group, please visit the firm’s website at www.WhiteSecuritiesLaw.com.

Tags: , , , , , , , Last modified: July 17, 2015