Two registered investment advisers were recently sanctioned by the SEC for impeding regulatory examinations. Evens Barthelemy and his firm, Barthelemy Group LLC located in New York, apparently misled SEC examiners about the adviser’s qualifications to be SEC registered. In a separate matter, Seth R. Freeman and his firm, EM Capital located near San Francisco, apparently impeded an SEC investigation by failing to produce books and records requested by the SEC over an 18-month period. Both firms have agreed to settle the SEC charges without contesting the staff’s allegations.
The enforcement actions in these matters demonstrates the SEC’s resolve to punish those advisers who materially impede their investigations. Advisers who are state-registered are reminded that they could be subject to similar enforcement actions by state securities administrators for materially impeding state examinations and investigations.
In the case of Mr. Barthelemy, the SEC asked the adviser for a list of client AUM to determine if the adviser’s reported AUM on its Form ADV was accurate. According to the SEC’s complaint, Mr. Barthelemy responded to the SEC’s request by fabricating the amount of its AUM to help support the statement that its AUM was sufficient to be registered with the SEC. At the time, an adviser must have at least $25 million of AUM to be registered with the SEC (which amount is now $100 million). Based on Mr. Barthelemy’s actions, the firm actually reported to the SEC AUM 10 times higher than what was actually the case. In order to resolve the SEC’s enforcement matter, Mr. Barthelemy agreed to be barred from the securities industry and from associating with an investment adviser. Mr. Barthelemy has the right to reapply after a two-year period. His firm was also censured, consented to a cease and desist order, and is required to, among other things, provide its clients with a copy of the proceeding and post it on the firm’s Web site.
As to Mr. Freeman and his firm, the SEC complaint alleged that Mr. Freeman’s firm failed to provide the SEC with requested books and records for a period of almost 18 months since the date of the SEC’s request. The records requested by the SEC consisted of financial statements, emails, and documents relating to the adviser’s management of a mutual fund client. The adviser did not comply with the records request until well after the SEC instituted enforcement action for the delay in responding. In order to resolve the SEC’s enforcement matter, Mr. Freeman and to his firm agreed to pay a combined penalty of $20,000 and to the issuance of a cease and desist order.