A New York-based investment advisory firm and its chief executive officer were fined a total of $100,000 by the Securities and Exchange Commission (SEC) for failing to adopt and implement policies and procedures tailored to guide the firm’s compliance with federal securities law.
Two Point Capital Management and CEO John McGowan “failed to adopt and implement reasonably designed compliance policies and procedures and to conduct annual reviews of its compliance program” from 2012-21, according to an SEC administrative proceeding issued Monday. Two Point was also faulted for failing to establish, maintain, and enforce a written code of ethics, as required by the Advisers Act.
The alleged violations were discovered during an SEC examination of the firm in 2021, the proceeding said.
The agency ordered Two Point and McGowan to cease and desist from future violations and censured Two Point. The firm was fined $75,000 and McGowan $25,000.
From 2012-21, McGowan was the firm’s CEO as well as its chief compliance officer and was the only person responsible for developing and implementing the firm’s compliance polices and code of ethics, the SEC said. Two Point hired a separate CCO in February 2021, the agency said, and McGowan continues to be the firm’s CEO.
Two Point and McGowan adopted a professional trade organization’s compliance handbook as the firm’s written compliance policies from 2012-21, according to the SEC. The handbook was intended as a guide for candidates preparing to take the organization’s examinations and not tailored to the firm’s client base or investment advisory business.
The SEC said Two Point failed to conduct any compliance training, perform annual reviews of its compliance program, or adopt and enforce a code of ethics over those years. Starting in 2020, the firm failed to file Form CRS as required as part of the passage of the Regulation Best Interest rule.
The SEC acknowledged Two Point and McGowan took remedial actions following the beginning of its examination of the firm. Two Point, which currently has four employees beyond McGowan, hired its new CCO and retained a third-party compliance consulting firm that is advising its overall compliance program. The firm revised its policies and procedures and implemented a written code of ethics, the SEC said.
Two Point did not return a request for comment.
No comments yet