SEC Charges Investment Adviser with Custody Rule and Related Violations
May 22, 2020
FILE NO. 3-19807
Washington, D.C., May 22, 2020 - The Securities and Exchange Commission today announced settled charges against New Jersey-based investment advisory firm TSP Capital Management Group, LLC for violating Commission rules designed to protect advisory clients from the misuse or misappropriation of their assets.
Registered investment advisers that have custody of client assets are subject to the "custody rule," which requires the advisers to undergo an annual surprise examination to verify the existence of assets or, where permissible, to distribute to investors, within 120 days of each fiscal year's end, annual audited financial statements for the fund prepared in accordance with Generally Accepted Accounting Principles (GAAP). According to the SEC's order, from 2014 through 2018, TSP Capital failed to distribute in a timely manner the required annual audited financial statements to investors in the largest private fund that the firm advised, thereby repeatedly violating the custody rule. In addition, TSP Capital failed to adopt and implement written policies and procedures reasonably designed to prevent custody rule violations.
The SEC's order finds that TSP Capital violated Section 206(4) 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, TSP Capital consented to a cease-and-desist order and a censure, and agreed to pay a civil penalty of $60,000.
The SEC's investigation was conducted by Christopher M. Castano and George N. Stepaniuk in the New York Regional Office, and supervised by Sanjay Wadhwa. The examination that led to the investigation was conducted by Haresh Mehta, Majid S. Mahmood, Merryl Hoffman, and Arjuman Sultana.