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SEC Charges Investment Adviser for Failing to Adopt New Compliance Policies for Clients and Seek Best Execution Despite Prior Notice of Deficiencies

March 13, 2023

File No. 3-21340

March 13, 2023 - The Securities and Exchange Commission today announced that Manhattan-based E. Magnus Oppenheim & Co. Inc. ("EMO") agreed to settle charges that it failed to adopt and implement reasonably designed compliance policies and procedures and to conduct best execution reviews for its advisory clients concerning its clearing broker.

According to the SEC's order, under which EMO neither admitted nor denied the SEC's findings, from at least 2019 to 2021, EMO's written compliance policies and procedures were adopted from another investment adviser's compliance manual without removing references to the other adviser and without adequately tailoring the manual to its own business. The order finds that the policies and procedures did not address certain areas relevant to EMO's business and operations, including policies and procedures involving access to client funds and custody, billing fees, and conducting due diligence of third-party service providers.

The SEC's order further finds that, also from at least 2019 to 2021, EMO failed to satisfy its duty to seek best execution because it did not make an adequate assessment of the commission rates, fees, or ticket charges charged by its clearing broker, try to negotiate better terms with its clearing broker, or make an adequate assessment of the commissions, fees, ticket charges, and execution quality available from other clearing brokers. EMO was on notice of both of these deficiencies following an examination by the Division of Examinations in 2019. EMO's founder, President, Chief Investment Officer, and Chief Compliance Officer passed away in June 2019, but EMO did not adequately address the identified compliance deficiencies thereafter.

The SEC's order finds that EMO violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Without admitting or denying the SEC's findings, EMO consented to a censure, a cease-and-desist order from committing or causing further violations of these provisions, the payment of a $50,000 penalty, and the imposition of an independent compliance consultant.

The SEC's investigation was conducted by Joshua D. Tannen and Steven G. Rawlings under the supervision of Sheldon L. Pollock, of the New York Regional Office. The SEC examinations that led to the investigation were conducted by George DeAngelis, Allison Erlenwein, Rachel Lavery, and Michael Paolo.

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