SEC Charges Chief Compliance Officer for Failure to Verify Information
David I. Osunkwo was a principal at Strategic Consulting Advisors, LLC, or SC Consulting. SC Consulting offered compliance consulting and CCO services to two SEC registered investment adviser firms under common control, Aegis Capital, LLC and Circle One Wealth Management, LLC. Respondent Osunkwo, a principal at SC Consulting, was designated as CCO to both Aegis Capital and Circle One.
Circle One filed an annual amendment to its Form ADV with the Commission in April 2011 that was intended to reflect a merger between the two investment advisers under common ownership and control of the same corporate parent holding company. In a settled enforcement proceeding, the SEC alleged the filing materially overstated the assets under management and total number of client accounts for Aegis Capital and Circle One. According to the SEC, the Form ADV filed by Circle One in April 2011 for the 2010 fiscal year overstated Aegis Capital’s and Circle One’s combined AUM by over $119 million and combined total number of client accounts by at least 1,000 accounts.
The SEC alleged Osunkwo received the following email from the CIO when preparing the amendment to the Form ADV:
“David – . . . I believe AUM was as follows on 12/31 Funds: $36,800,000
Schwab/Fidelity: $96,092,701 (1,179 accounts) (not sure how many customers) Circle One: probably higher than $50m, but hopefully [another employee] told you a number today
Total is in the $182.89m range . . . .”
The SEC alleged Osunkwo and SC Consulting adopted these estimates, without taking sufficient steps to ascertain their accuracy, when they filed Circle One’s annual amendment to Form ADV for the December 31, 2010 year end.
The SEC also said that as a result of the impending deadline for filing the Form ADV, Osunkwo listed the CIO as signatory certifying the ADV without confirming with the CIO. As a result, the form that Osunkwo and SC Consulting filed misstated that the CIO had also certified the contents to be true and correct.
The settlement order states as a result of the conduct, Osunkwo willfully violated Section 207 of the Advisers Act, which makes it “unlawful for any person willfully to make any untrue statement of a material fact in any registration application or report filed with the Commission under Section 203, or 204, or willfully to omit to state in any such application or report any material fact which is required to be stated therein.”
Osunkwo was required to pay a civil money penalty of $30,000 and was suspended from certain activities such association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization for a period of twelve (12) months.
Osunkwo did not admit or deny the findings in the SEC order.
Contact Steve Quinlivan for more information.