SEC Action Reaffirms Focus On Affiliated Transactions

A recent SEC action against a US investment advisor for manipulating an auction of commercial real estate assets on behalf of one client at the expense of another highlights that affiliated transactions remain firmly in the focus of the SEC, with a continued desire to prosecute improper trades.

The case against registered investment advisor Tamlico and its former Chief Operating Officer, for breaching their fiduciary duty to a client, highlights the need for investment advisors to have well-established internal policies and procedures in place to mitigate conflicts of interest on trades between co-managed accounts. Significantly, advisors should ensure that these controls, such as conflict review boards or committees, maintain sufficient independence from the advisor or its affiliates to comply with the anti-fraud provisions of the Investment Advisors Act of 1940.