At the fall NRS Conference, the presenter and the audience were both surprised to reveal that false addresses was a new enforcement initiative for the Securities and Exchange Commission when it came to registered investment advisers and fund managers. Two weeks ago, the SEC came out with three enforcement actions against advisers that had falsely claimed Wyoming as their primary business address. Last week, the SEC came out with a fourth.
Logical Wealth Management was operated out of Massachusetts in 2002 and registered with the SEC. In 2010, with the Dodd-Frank changes to registration, Logical Wealth converted to a Wyoming corporation. Because Wyoming does not regulate investment advisers, any investment adviser with a principal office and place of business in Wyoming, regardless of its assets under management, is required to register with the SEC.
The problem was that Logical Wealth never had the $25 million in assets under management to register with the SEC in the first place and never had its principal office and place of business in Wyoming to continue the registration.
The registration failure was not the only problem. Logical Wealth failed to adopt and maintain compliance policies and procedures and failed to maintain some required books and records. In particular, Logical Wealth could not produce the records relating to its calculation of its assets under management.
Sources:
- SEC Order Against Logical Wealth Management (.pdf)
- Breaking All the Rules by Jessica M. Brown in Pillsbury’s Investment Fund Law Blog
- SEC Examination and Enforcement Priorities
- The Lure of Wyoming