A September 30, 2020 enforcement action brought by the SEC pivoted on a failure to effectively exercise “substantial investment authority”. Day to day investment advisory services were provided by an affiliated RIA of the trust company. Despite periodic portfolio review meetings, the Trust Company was not effective in correcting the RIA’s non-compliant trades, which in turn, both occasioned losses and laid bare the Trust Company’s ineffective exercise of its investment authority. (Excessive marketing on the trust company’s website did not help matters.)
On the positive side of the ledger, the case implies that quarterly supervision of an affiliated investment adviser that is effectively implemented could be sufficient.
