SEC Charges Investment Adviser with Custody Rule and Related Violations

ADMINISTRATIVE PROCEEDING
File No. 3-22075

August 30, 2024 - The Securities and Exchange Commission today announced that New York City-based investment adviser Arcis Capital Investment Advisors LLC ("Arcis") agreed to settle charges related to its failure to comply with Commission rules designed to protect advisory clients from the misuse or misappropriation of their assets and for failure to adopt and implement reasonably designed written policies and procedures to prevent such violations.

According to the SEC's order, Arcis has been registered with the Commission as an investment adviser since 2017. The SEC's order finds that Arcis violated the custody rule by failing to undergo an annual surprise examination and failing to deliver to investors within the prescribed time period audited financial statements for three private funds for 2021 and 2022. The SEC's order also finds that Arcis failed to comply with the requirement that every investment adviser registered with the Commission adopt and implement written policies and procedures reasonably designed to prevent violations concerning the custody of client funds and securities. Registered investment advisers that have custody of client funds and securities are subject to the "custody rule," which requires the advisers to undergo an annual surprise examination by an independent public accountant to verify the existence of client funds and securities or, where permissible, to distribute to investors, within 120 days of each fiscal year end, annual audited financial statements for the fund prepared in accordance with generally accepted accounting principles.

The SEC's order finds that Arcis willfully violated Section 206(4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rules 206(4)-2 and 206(4)-7 thereunder. Without admitting or denying the findings, Arcis consented to a cease-and-desist order, a censure, and agreed to pay a $30,000 penalty.

The SEC's investigation was conducted by Peter Altenbach and Lindsay S. Moilanen under the supervision of Tejal D. Shah. The SEC examination that led to the investigation was conducted by Jennifer Klein, Kevin Rush, Anna Shmidt, and Merryl Hoffman.