Registered Investment Adviser Charged with Inadequate Controls to Prevent Insider Trading
Feb. 4, 2020
File No. 3-19689
February 4, 2020 - The Securities and Exchange Commission today announced settled charges against registered investment adviser Cannell Capital, LLC (CCL) of Alta, Wyoming for not having policies and procedures reasonably designed to prevent the misuse of material nonpublic information.
According to the SEC's order, CCL specializes in investing in the securities of thinly-traded companies with little or no analyst coverage. To understand these securities, it frequently communicated with issuer insiders and others who had access to material nonpublic information. The order finds that from 2014 through October 2019, CCL failed to follow its written policies and procedures by not maintaining a reasonably designed list of securities that members, officers, and employees and their family household members were prohibited from trading after the firm came into possession of potential material nonpublic information. The order also finds that CCL's written policies and procedures were not reasonably designed to prevent misuse of material nonpublic information because they did not address any business-specific risks and lacked any guidance regarding when trading in securities should be restricted.
The order finds that CCL violated Section 204A of the Investment Advisers Act of 1940 by failing to establish, maintain, and enforce policies and procedures reasonably designed to prevent the misuse of material, nonpublic information. Without admitting or denying the findings in the SEC's order, CCL consented, to the entry of a cease-and-desist order, a censure, and a $150,000 civil penalty.
The SEC's investigation was conducted by Jennifer R. Turner, Adam S. Ross, and Som P. Dalal and was supervised by Mary S. Brady and Jason J. Burt of the SEC's Denver office. The SEC examination that led to the investigation was conducted by Jonathan M. Warner and John Kyle Holmberg and was supervised by Kenneth L. Bossert, Lisa Byington and Thomas M. Piccone.