SEC Charges Investment Adviser with Supervisory and Compliance Failures
July 16, 2020
File No. 3-19882
July 16, 2020 - The Securities and Exchange Commission today announced that First Western Capital Management Company, a Colorado-based registered investment adviser, has agreed to settle charges that it failed reasonably to supervise its investment adviser representatives who purchased securities sold in reliance on Rule 144A under the Securities Act of 1933 for advisory clients when the clients were not qualified institutional buyers in a Rule 144A transaction, and failed to adopt and implement written policies and procedures reasonably designed to prevent violations of the Investment Advisers Act of 1940 and the rules thereunder by the adviser and its supervised persons.
According to the SEC's order, FWCM's advisory business includes, in part, purchasing for its clients securities sold in reliance on Rule 144A, which provides a non-exclusive safe harbor for resales of restricted shares to "qualified institutional buyers." From October 2010 through July 2017, the order finds, FWCM representatives purchased approximately $666 million, which represented 9.4% of securities purchases for all client accounts, in restricted shares sold in reliance on Rule 144A for 81 advisory accounts that were not qualified institutional buyers. According to the order, during this period, FWCM failed to adopt written compliance policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder by the adviser and its supervised persons. In addition, as set forth in the order, FWCM failed reasonably to supervise within the meaning of Section 203(e)(6) of the Advisers Act, with a view to preventing its investment adviser representatives' violations of Section 17(a)(3) of the Securities Act.
The SEC's order finds that FWCM violated Sections 203(e)(6) and 206(4) of the Advisers Act and Rule 206(4)-7 thereunder. Without admitting or denying the findings, FWCM agreed to be censured, to a cease-and-desist order, and to pay a $200,000 penalty.
The SEC's investigation was conducted by Marc D. Ricchiute and Kimberly L. Frederick of the Asset Management Unit in the Denver Regional Office, with the assistance of Dan Small, Bruce Ketter, David Buhler, and Kenneth Bossert of the Denver Regional Office.