SEC Charges 38 Investment Advisor Firms With Bogus Filings — Barrons.com

By Kenneth CorbinThe Securities and Exchange Commission has brought charges against 38 entities it accuses of falsely posing as investment advisor firms and falsifying information on the Form ADV documents advisors file with the commission. Those entities, some of which appear to be based in foreign countries, attempted to use SEC filings to make themselves appear legitimate to U.S. investors, the commission alleges.The SEC says that each of the entities it is charging filed its Form ADV claiming to be an exempt-reporting advisor, or ERA, a designation for firms that only advise private funds and aren't formally registered with the SEC. "An ERA legally cannot provide investment advice directly to you, as an individual," the commission says in a risk alert it issued on Thursday warning investors about scammers using bogus SEC registrations to appear legitimate.Some of the entities involved in the new enforcement action promoted themselves on websites displaying fake certificates indicating that the SEC had authorized them to operate as registered investment advisors, the commission alleges. Many were pitching crypto investments."Our complaints allege large-scale abuse of SEC adviser filings by persons, several of whom are likely located overseas, exploiting interest in emerging technologies," says Laura D'Allaird, chief of the Cyber and Emerging Technologies Unit at the SEC's Enforcement Division. "When we find bad actors using fraudulent SEC filings to feign legitimacy with retail investors, we will act decisively to disrupt these operations."The SEC filed its civil complaints against the 38 entities in federal court in Colorado, which it says they identified as their place of business. The commission says that they had no physical presence in the state and that phone numbers they listed were either out of service or linked to unrelated businesses. None of the entities responded to the SEC's inquiries attempting to verify information on their ADV forms, the agency says.The SEC notes that it doesn't issue certificates authorizing advisors to do business to ERAs or RIAs, urging investors to be aware of firms making any claims to that effect. ERAs are subject to some record-keeping and reporting requirements, but they aren't as rigorous as the rules for RIAs. The rules against fraud apply universally."ERAs are not subject to some of the regulations that apply to registered advisors, many of which are designed to protect investors," the SEC says in its risk alert. "ERAs, however, are subject to the same prohibitions against fraud as registered advisors."Write to [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.