SEC Charges Advisory Firm ClearPath with Custody Rule and Liability Disclaimer Violations
- Written by Newsfile
September 03, 2024 3:38 PM EDT | Source: Newsfile SEC Press Digest
Washington, D.C.--(Newsfile Corp. - September 3, 2024) - The Securities and Exchange Commission today announced settled charges against ClearPath Capital Partners LLC for failing to comply with requirements related to the safekeeping of client assets and for its use of impermissible liability disclaimers in its advisory and private fund agreements.
According to the SEC’s order, ClearPath failed to timely distribute annual audited financial statements to investors in certain private funds that it advised. In addition, in its advisory agreements and certain private fund partnership and operating agreements, ClearPath included liability disclaimers, commonly referred to as hedge clauses, that could lead a client to incorrectly believe that the client had waived non-waivable causes of action against the adviser. Certain of the liability disclaimers also contained misleading statements regarding ClearPath’s otherwise unwaivable fiduciary duty.
“The SEC remains focused on the custody rule, which is vital to investor protection,” said Andrew Dean, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “In addition, all advisers, including private fund advisers, should be mindful about including hedge clauses in agreements. Even for private fund advisers, in certain circumstances, such clauses could be misleading.”
The SEC's order finds that ClearPath violated sections 206(2) and 206(4) of the Advisers Act and Rules 206(4)-2 and 206(4)-7 thereunder. Without admitting or denying the SEC's findings, ClearPath agreed to a censure, to cease and desist from further violations of the charged provisions, and to pay a $65,000 civil penalty.
The SEC’s investigation was conducted by Steven Varholik of the Asset Management Unit in the San Francisco Regional Office, with assistance from Carol Lee, Kathleen Purcell, Thu Ta, and Bradley Cline of the Division of Examinations. The investigation was supervised by Jeremy Pendrey, Mr. Dean, and Corey Schuster.
SOURCE: Newsfile SEC Press Digest