I have seen a dramatic uptick in administrative enforcement actions by the Florida Office of Financial Regulation (OFR) targeting registered investment advisors, particularly one-man shops. While it is not clear if this is an OFR sweep, the volume of inquiries I have recently received suggest it may be.
The OFR’s administrative complaints seem to be primarily focused on investment advisor’s violations of the safekeeping requirements under Florida law, namely Florida Administrative Code 69W-600.0132(2)(a)-(f). Typically, the investment advisor is alleged to be in violation of this provision by either failing to: (1) possess written authorization from the client to deduct advisory fees, and/or (2) send the client an invoice itemizing the fees, which must include the formula used to calculate the fee, the amount of assets under management upon which the fee is based, and the time period covered by the fee.
Failure to comply with the safekeeping requirements is not only a violation in and of itself, but also causes the investment advisor to be in breach of other investment advisor laws, including net capital and the necessity of filing audited financial statements. This “snow ball” effect leads to yet even more charges by the OFR in its complaint and the seeking of substantial additional fines.
My firm has recently successfully resolved one of these investment advisor cases on financial terms substantially below that which the OFR sought in its administrative complaint, including reduced charges. Each case is different, however, and no guarantees of a successful outcome can be made.
If your investment advisory firm has been sued by the OFR, or is under investigation, I would be happy to confidentially discuss your situation.