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Recent Examinations
June 2018
An examination of a Santa Fe Investment Advisor was found to be in compliance with the books and records requirements of the Act and no additional action was required by the firm.
May 2018
An examination of a Santa Fe Investment Advisor that was closing their business was found to be in compliance with the books and records requirements of the Act. No additional action was required by the firm.
While conducting an examination on an Albuquerque based firm, it was determined that the firm’s information on their ADV, Part 1A required updates. The staff compared the Investment Agreement and found discrepancies within the agreement and the types of advisory services that the investment advisor truly offers. Upon review it was discovered that the firm was not maintaining general ledgers, including any and all records or original entry from the basis of entries in any ledgers, cash receipts, disbursement records, bank checkbooks, bank statements, cancelled checks and all cash reconciliation of the firm and the investment advisor. Clients were not being mailed invoices for management fees. It was also determined that the firm was not regularly documenting and maintaining the minimum requirements for their client’s and the FINRA Rule 2090 “Know Your Customer”.
April 2018
While conducting an examination on a Santa Fe based firm, it was determined that there were errors in the new form ADV Part 1 filing as it related to regulatory assets under management. Additionally, the firm had some discrepancies in its disclosure of outside business activities and information in the ADV Part 1 and the ADV Part 2 did not correlate. The firm’s website did not disclose the state in which it was licensed to do business. There were some books and records violations as it related to safeguarding clients’ non-public identifying information; records were stored in an unsecure area and visible to public in a non-locking storage area.
During an examination of an Albuquerque based firm, it was determined that much of the firm’s information on their ADV, Part 1A was incomplete and/or outdated. The form ADV Part 2 included disclosures of outside business activity that the firm and representatives were no longer licensed to sell. The firm did not maintain a general ledger and the firm’s funds were comingled with those of the owner. The firm did not have a way to memorialize regular updates to maintain the minimum “know your customer” rule, a requirement that is heighten by the fiduciary responsibility the firm has to the customer.
January 2018
A limited review of an Albuquerque firm’s books and records found them to be in compliance with the New Mexico Securities Act.
In reviewing an Albuquerque firm’s books and records, it was determined that the documents reviewed were in compliance.
November 2017
The examination of a Northern New Mexico firm uncovered that the firm was not sending concurrent invoices to clients nor did they have client waivers on file to negate the need for the invoice. The records retention policy did not meet the state requirement.
An examination of a Southern New Mexico investment advisory firm uncovered a custody relationship, created by a pooled investment vehicle, that required the firm to purchase and maintain a $2 million surety bond. The surety bond is in place and proper documentation must be submitted to the division annually.
The examination of a Taos based investment adviser uncovered a number of recordkeeping and disclaimer related violations. The adviser was directed to add appropriate disclaimers to the website, update the document retention policy to 6 years, and send clients concurrent invoices or obtain the necessary waiver.
October 2017
The review of the books and records of a Santa Fe based investment adviser found that the written supervisory procedures did not include a business continuance plan or proper timelines for document retention.
An Albuquerque investment adviser was examined and had the five-year federal standard in his written supervisory and procedures, instead of the NM state requirement of six years. The correction was made on-site.
A review of a Santa Fe firm’s books and records were found to be in compliance.
The books and records examination of a Santa Fe firm found records to be in compliance.
September 2017
A review of the books and records of a Santa Fe investment adviser found a lack of disclosure as it related to tiered fee calculation and performance fees. Additionally, the firm had to update a number of outdated policies and procedures.
An investment advisory firm located in Sandia Park was examined and the books and records were in compliance.
The examination of a Santa Fe investment adviser found that the firms Form ADV Part 1 and Part 2 were not being updated (annually or based on material change) as required. Additionally, the firm had insufficient written supervisory procedures.
The review of the books and records of a Santa Fe based investment adviser found that the written supervisory procedures did not include a business continuance plan or proper timelines for document retention.
August 2017
The books and records examination of a Santa Fe firm found records to be in compliance.
The examination of a New Mexico investment adviser found that the firm had insufficient written supervisory procedures and had custody by way of direct deduction of fees and did not have proper documentation and discourses to negate it.
July 2017
The books and records of an Albuquerque based Registered Investment Adviser revealed a discrepancy of the holding period/maintenance requirement of its records retention policy. It was compliant in all other areas.
A routine examination of a registered investment adviser in Santa Fe resulted in a number of document corrections. The adviser was advised that the written policies and procedures needed to be kept current and adequately reflect the actions and needs of the business. Many of the firm’s disclosure documents included language that incorrectly stated it was affiliated with a broker-dealer firm that was acting as custodian and cleared the trades. There were also discrepancies in the way the firm associated and referenced a supervisory relationship existed between the State of New Mexico and the firm.
A review of a Santa Fe firm’s books and records were found to be in compliance.
The routine examination of an Albuquerque-based firm uncovered a number of violations including, but not limited to supervision violations and employees having undisclosed investment related outside business activity. The firm had a significant number of issues that required correction on the form ADV Part 1 and insufficient funds in the bank to meet the capital requirements of a RIA with discretionary authority. The firm undated the Form ADV, Part 1 and 2; made a necessary deposit and allowed the conflicted employee to resign.
A routine examination of a Santa Fe based firm found no violations
June 2017
An examination of an Albuquerque firm found that clients were not being mailed invoices for the fees that were being directly deducted from the client advisory accounts as required under NMAC Rule 12.11.5.22 H (1) (b). The firm was advised to start issuing invoices or obtain a signed waiver from the client as allowed in NMAC 12.11.5 H (2).
A review of the books and records of an Albuquerque firm were found to be in compliance.
A review of a Santa Fe registered investment advisor found a number only a draft of written policies and procedures and were not able to locate the finalized document at the time of the examination. All other reviewed records were found to be in compliance.
An examination of an Albuquerque based firm uncovered a lack of policy and consideration as it applied to cybersecurity and vulnerable adults. The advisory firm was provided some guidance and a link to the SEC’s IA Release Number 2204 (12/17/2003) to consider as it drafted and prepared its own written policies and procedures.
May 2017
In reviewing an Albuquerque firm’s books and records, it was determined that the documents reviewed were in compliance. A best practice recommendation was made by the division to include the firm’s Business Continuity Plan as part of the Written Supervisory Procedures.
In reviewing a Corrales firm’s books and records, it was determined that the documents reviewed were in compliance.
The review of the books and records of an Albuquerque firm found that the firm was not completing the annual updating amendments to the Form ADV Part 1 and ADV Part 2 in a timely matter. The division provided guidance in this area and recommended that the firm add their Business Continuity Plan into the Written Policies and Procedures.
In a review of an Albuquerque firm’s books and records the Division found a lack of written policies and procedures, inadequate documentation relating to direct fee deduction from client accounts and inaccuracies in the adviser’s Form ADV. The lack of policies may have led to a fraudulent transfer of funds out of a client’s account.
April 2017
A limited review of an Albuquerque firm’s books and records found them to be in compliance with the New Mexico Securities Act.
In reviewing an Albuquerque firm’s books and records, it was determined that the documents reviewed were in compliance.
A limited review of a Placitas firm’s books and records found them to be in compliance with the New Mexico Securities Act.
A review of a firm’s book and records was conducted as they began transitioning the business toward a “merger” with another state registered investment adviser. The records reviewed seemed to be in good order. The division advised the adviser to manage the close and reinforced the six-year record retention rule.
March 2017
In reviewing an Albuquerque firm’s books and records, it was found that the firm did not have written supervisory policies and procedures and was reprimanded for this prohibited business practice. Division staff recommended that the firm remove or clarify a hold harmless clause from its Investment Advisory Agreement. In addition, the firm had three schedules at the end of the agreement that were referenced throughout, but physical examination of client contracts showed that these were blank in most instances. The firm was instructed to complete the contracts in their entirety or to incorporate the information from these schedules into the existing sections of the contract.
An examination of a Santa Fe Investment Adviser uncovered violations in the firm’s record retention policy; documents were being maintained for five years instead of six. The firm also had commenced an investment advisory relationship prior to having written contracts in place. Finally, corrections and additions were requested for the Business Continuity Plan to reflect the actual plan that was in place. All other records appeared to be in good order.
February 2017
An examination of a Registered Investment Advisor in Albuquerque uncovered a lack of information on client invoices including date of invoice, date of valuation and the calculation used to determine the fee amount. Discrepancies were noted between the assets characterized as discretionary on the Form ADV Part 1 and the actual language contained in the contracts. The RIA firm had an employee acting as a trustee on a client accounts and was found to have custody, requiring the firm to have a minimum net worth of $2,000,000 or to post a surety bond up to that amount.
June 2015
An examination of a firm’s books and records fond discrepancies in the services offered in the Investment Advisory and Financial Planning Contract. The firm incorrectly stated it charged fees in arrears when it actually charges in advance. The advisor’s username and password automatically populated, bypassing an important privacy/security feature. The firm had engaged in financial planning services with three clients without a contract. The firm was charged the $100 examination fee and a $500 fine for violations. The fine was suspended after a pre-established 60 day compliance review was completed
April 2015
An examination of a firm’s books and records found that the billing occurred quarterly in advance. The contract outlined how fees would be billed if a client established the relationship in the middle of a calendar quarter, but did not include a refund policy if the relationship was terminated during a calendar/billing quarter. The Division ordered the addition of a refund policy for unearned fees into the contract.
March 2015
In reviewing a firm’s books and records, it was determined that the firm had a hedge clause in its investment advisory contract with clients. The Division ordered that it be removed, as to not mislead clients to their rights under federal and state securities law.
February 2015
An examination of a firm’s books and records uncovered a number of discrepancies between the fee structure outlined in the ADV Part 2 and the Investment Advisory Contract. The firm was required to reconcile these documents and update other dated or missing information in the IARD system within a set timeframe established by the Division.
January 2015
An examination of an Albuquerque Registered Investment Adviser’s (RIA) books and records resulted in the discovery of improper disclosures in the firm’s brochure, a minimum net worth below the amount required, and a pattern of late registration for both the RIA and its representative. The firm was given a set time to bring itself into compliance and invoiced for the examination. The Division did not receive a satisfactory response and was referred to Enforcement for action.
November 2014
On November 20, 2014 the Securities Division issued a Notice of Contemplated Action to BOSC, Inc. and Thomas Wayne Hayes. This was a result of a long-term, ongoing investigation into the alleged mismanagement and improper investments made by Bernalillo County Treasurer’s Office (“BCTO”). In summary, Tom Hayes (“Hayes”) and his employer BOSC, Inc. (dba Bank of Albuquerque) failed to ensure that investments made by BCTO were in line with the written investment policy and made recommendations that were not suitable. Hayes continued to sell bonds to the county based on yield with no concern of safety or liquidity. Hayes’s conduct went against BOSC’s policies and procedures. Further, BOSC failed to supervise Hayes and his sales practices and did not prevent or detect violations of suitability of recommendations. It is proposed that Hayes will be permanently barred from transacting business in New Mexico; BOSC will be suspended from conducting business in New Mexico as a broker-dealer until their supervisory system is adequate to prevent or detect violations; $10,000 fines will be assessed against BOSC and Hayes for each violation of the New Mexico Securities Act; BOSC and Hayes will each pay $10,000 towards the cost of the investigation.
On November 20, 2014 the Securities Division issued a Notice of Contemplated Action to Oppenheimer & Co., Inc. (“Oppenheimer”) and Royce O. Simpson (“Simpson”). This was a result of a long-term, ongoing investigation into the alleged mismanagement and improper investments made by Bernalillo County Treasurer’s Office (“BCTO”). Oppenheimer terminated Simpson in February 2014 during an internal review of the servicing of the BCTO account. In summary, Simpson was granted an unfair advantage over other broker-dealer agents in competing for BCTO’s business. Simpson and Oppenheimer failed to ensure that solicited investments offered to BCTO were suitable and in line with the written investment policy of the county. The county’s priorities were “safety, liquidity and yield.” Ultimately, BCTO had an overconcentration of long-term of Government Sponsored Enterprise bonds with 10 to 20 year maturities, leaving it at a greater risk for interest rate and liquidity risk. Neither Oppenheimer nor Simpson disclosed that the recommendations were not suitable. Oppenheimer’s supervisory system failed to reasonably detect or prevent violations. It is proposed that Simpson will be permanently barred from transacting business in New Mexico; Oppenheimer will be suspended from conducting business in New Mexico as a broker-dealer until their supervisory system is adequate to prevent or detect violations; $10,000 fines will be assessed against Oppenheimer and Simpson for each violation of the New Mexico Securities Act; Oppenheimer and Simpson will each pay $10,000 towards the cost of the investigation.
October 2014
An examination of a firm’s books and records revealed that a firm that charges its clients fees in advance did not have a refund policy to return unearned fees. Two clients had terminated after they had prepaid fees for the quarter and no refund was offered. The firm contacted both past clients and issued refunds of the unearned fee.
August 2014
While conducting an examination on an Albuquerque based firm, it was determined that while a copy of the firm’s Privacy Policy was available online, it was not being sent to clients annually. In addition, client files were being stored in a non-locking credenza. The firm has since set in place a plan to meet the annual requirement to deliver a copy of the privacy policy to all clients. Locking file cabinets have been purchased for the storage of client information.
An examination of an Albuquerque Investment Advisor revealed a lack of security for client’s non-public identifying information. Old client records were being stored in an open area in cardboard file boxes and non-locking file cabinets in an open kitchen/storage area. Advisor was instructed to store these items in locking file cabinets or a locked storage room to further ensure client’s private information.
A review of the books and records of an Albuquerque Investment Advisor revealed a lack of contract with clients. The firm primarily acts as a solicitor for third-party investment advisory firms. The firm would deliver the third-party agreements and have the clients sign, they did not have their own investment advisory agreement with the clients. The firm has since created an investment advisory contract that all clients are required to enter into t conduct business with the advisor.
July 2014
An examination of a Santa Fe Investment Advisor determined that a solicitor was being paid an ongoing fee for client referrals and was not registered as an investment advisor. The registered investment advisor and the individual receiving the referral fees were sent notification of the apparent violation of 12.11.5.20 NMAC. In addition, there were no written policies and procedures, a violation of Rule 12.11.6.8A.(17) NMAC. This had been noted in a previous examination, but not corrected. The firm was charged the cost of the examination.
June 2014
During the examination of a Investment Advisor the review of the firms trade blotter and fee invoice found the firm was withdrawing surrender-free money from accounts for which a client was paying percentage of assets under management and pruchasing annuity add-ons for which a commission was earned for the same period, a violation of NMAC 12.11.7K(2). When the overbilling was detected, the client was contacted and the fee was credited to the client.
May 2014
While reviewing the records of an Investment Advisor firm with multiple representatives, it was discovered that representatives were not disclosing their outside business activities. They also did not disclose personal bankruptcies as required. The firm was operating without the designated principal having the required S24 examination, nor did the principal have a professional designation waiver. All disclosures were updated and the designated principal obtained the required S24 examination, no further action was required.
November 2013
An examination of an Albuquerque registered Investment Advisor showed the firm had two representatives registered without the designated principal holding the proper S24 examination, or professional designation waiver. The firm was given a deadline for the designated principal to take the S24 examination. The firm failed to do so even after being given another extension of time. The firm voluntarily terminated the other representative. While the individual is still employed with the firm the individual cannot give any investment advice to clients and now has an operational role.
September, 2013
During the examination of a SEC Investment Advisor firm who switched to state registration, the firm had an investment adviser representative who executed over 100 trades without being registered in New Mexico, in violation of the New Mexico Uniform Securities Act. The firm was fined $5,500 in civil and investigative costs and had to pay the $100 cost of the examination.
August 2013
During the review of the firm’s application, the firm transacted business in New Mexico without being licensed, in violation of the New Mexico Uniform Securities Act. The firm was fined $3,500 and had to pay registration fees in the amount of $350.
July 2013
An Investment Advisor firm was recently examined after switching from SEC to state jurisdiction. The examination found the firm borrowed money and issued promissory notes to existing clients in violation of the New Mexico Uniform Securities Act. The firm was fined $7,500 and had to pay the $100 cost of the examination.