Another Danger of Overstating Assets

The Securities Division of the Massachusetts’ Secretary of State’s office filed an administrative complaint against CCR Wealth Management. The complaint seeks to deny CCR Wealth Management registration as an investment adviser.

The secretary of state’s office said inspectors became suspicious when they noticed that CCR had reported static denominations over a period of time, even as its number of accounts fluctuated. According to the complaint, between 2007 and 2011, CCR reported exactly $25 million under management, even as its number of accounts fell from 350 to 250.

That $25 million number is the threshold between registration with the Securities and Exchange Commission and state level registration. With the transition from federal to state, a new set of eyes will be looking at the Form ADV filings and may have a different take on things.

What surprises me most about the story is that the Secretary of State noticed the issue and was able to act on it. I suppose we should credit an astute examiner in Massachusetts who compared the prior filings to the new state filing. I assume that person is overworked with a flood of new filings coming in this year.

It’s not clear what happened or that CCR did anything wrong. The company focuses on wealth management and estate planning. The SEC did impose a new and better defined method for calculating assets under management. The prior filings may have included items that are no longer included.

I find it strange that Massachusetts is seeking to prohibit CCR’s registration with the state. That seems like the nuclear option for something may merely be a misunderstanding rather than an intentional misdeed.

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