The Securities and Exchange Commission has fined a Wellesley-based wealth management company $250,000 for not properly protecting its clients' money, the federal agency announced Monday.
The commission found that a GW & Wade client's email was hacked in June 2012, with the perpetrator posing as that person and wiring a total of $290,000 to foreign banks. Since the company used pre-signed letters of authorization, the perpetrator was able to make off with the money, the SEC said.
GW & Wade reimbursed the client, but officials said that the firm still violated the SEC's "custody rule," which states that investors with legal custody of their clients' funds must provide certain safeguards for that money.
The Wellesley firm also failed to identify itself as a legal custodian to its independent auditors, and inaccurately disclosed to the SEC the amount of client assets in custody and its custody arrangements.
In consenting to a censure and cease-and-desist order, GW & Wade agreed to pay a $250,000 penalty, SEC officials said.
The SEC investigation also uncovered that New York-based Further Lane Asset Management and Minneapolis-based Knelman Asset Management Group violated the custody rule for not maintaining client assets properly and failing to have an SEC-mandated surprise exam.
“The heart of the relationship between advisers and their customers is the safety of client assets. Surprise exams or procedures associated with audited financial statements provide additional safeguards against assets being stolen or misused,” said Andrew Ceresney, co-director of the SEC’s enforcement division, in a statement. “These firms failed to comply with their custody rule obligations, and other firms who hold client assets should take notice that we will vigorously enforce such requirements.”
For more information, visit the SEC's website.
Jaclyn Reiss can be reached at firstname.lastname@example.org