SEC Finds Collective Investment Trust to Violate 1940 Act

07 October 2020 Foley Funds Legal Focus Blog
Authors: Stuart E. Fross Peter D. Fetzer Stephen M. Meli Margaret Gembala Nelson
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.

Please Contact Stuart Fross and Peter Fetzer for more information.
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.