Santos, Postal & Co. P.C., an accounting firm, and Joseph Scolaro, one of its partners, agreed to settle charges brought by the Securities and Exchange Commission that they failed to adequately conduct surprise examinations of the assets of an investment adviser client where later it was discovered that the IA’s president stole money from customers’ accounts. Previously, the SEC sued Brian Ourand, the former president of SFX Financial Advisory Management Enterprises, Santos, Postal’s client, for allegedly stealing client funds from 2006 to 2011. The SEC also sued SFX and Eugene Mason, SFX’s chief compliance officer. The SEC charged Mr. Mason with causing SFX not to have adequate compliance policies and procedures reasonably designed to detect the theft by Mr. Ourand. In connection with the current matter, the SEC charged that Santos, Postal and Mr. Scolaro undertook deficient surprise custody examinations of SFX and did not sufficiently consider risk fraud factors. The SEC charged that defendants also filed untrue statements with it in 2010 and 2011 when, in one instance, they noted their compliance with certain procedures to verify customer assets when they never conducted the procedures , and, in another instance, said that SFX’s customer assets were held with a qualified custodian, when they were not. To resolve this matter, Santos, Postal agreed not to appear before the SEC as an accountant for at least one year; disgorge profits of US $25,800 plus interest; and pay a fine of US $15,000. Mr. Scolaro agreed not to appear before the SEC as an accountant for at least five years and pay a fine of US $15,000. (Click here for details of the SEC legal actions against SFX, Mr. Ourand and Mr. Mason, in the article, “Investment Adviser Chief Compliance Officer Blamed in SEC Lawsuit for President’s Theft of Client Funds; SEC Commissioner Criticizes Enforcement Actions Against CCOs Generally” in the June 21, 2015 edition of Bridging the Week.)
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Accounting Firm Sanctioned for Inadequate Surprise IA Custody Audit
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