SEC Charges Investment Adviser with Custody Rule and Related Violations
Sept. 16, 2019
FILE NO. 3-19448
Washington, D.C., September 13, 2019 - The Securities and Exchange Commission today announced that New York-based investment advisory firm ED Capital Management, LLC, and its managing member and owner Elliot Daniloff, also known as Ilya Olegovich Danilov, have agreed to settle charges that ED Capital did not comply with the custody rule, made untrue statements in ED Capital's Forms ADV and failed to conduct annual reviews of its compliance policies and procedures.
According to the SEC's order, from fiscal years 2012 through 2016, ED Capital, d/b/a Daniloff Capital Management, LLC, failed to distribute annual audited financial statements prepared in accordance with Generally Accepted Accounting Principles, to the investors in the largest private fund that it advised when it was a registered investment adviser, thereby repeatedly violating the custody rule. In addition, the SEC's order finds that Daniloff, on behalf of ED Capital, signed and filed annual Forms ADV that falsely stated that ED Capital did, in fact, distribute audited financial statements to the fund's investors. The SEC's order also finds that ED Capital failed to adopt and implement written policies and procedures reasonably designed to prevent custody rule violations and failed to conduct the requisite annual reviews of its written policies and procedures.
The SEC's order finds that ED Capital and Daniloff violated Sections 206(4) and 207 of the Investment Advisers Act of 1940 and Rules 206(4)-2 and 206(4)-7 thereunder. Without admitting or denying the order's findings, ED Capital and Daniloff agreed to a cease-and-desist order. Further, ED Capital agreed to be censured and to pay a $75,000 civil penalty, and Daniloff agreed to pay a $25,000 civil penalty.