SEC settles administrative proceedings against adviser and top executive over undocumented block trade allocation practices

Purpose – The purpose of this paper is to provide a summary of the terms of a settled Securities and Exchange Commission administrative proceeding that illustrates the views of the SEC examination and enforcement staff regarding appropriate practices for investment advisers registered under the Investment Advisers Act of 1940 (the “Advisers Act”) to follow when engaging in block trades for client accounts. Design/methodology/approach – The paper summarizes the SEC's findings regarding the adviser's block trade allocation practices, resulting violations, and the adviser's remedial efforts, and provides the sanctions agreed to. Findings – The SEC's findings related primarily to the adviser's practices regarding the allocation of block trades when participating client accounts had insufficient funds to purchase their allocation. Practical implications – This settlement provides an important reminder for registered investment advisers of the focus by SEC examination and enforcement staff on trade allocation practices and related record keeping and compliance program documentation. Originality/value – The paper provides a practical explanation by experienced financial services lawyers.