Full and complete disclosure to your clients is a critical component of your advisory business. This was illustrated perfectly today when the SEC charged a prominent San Diego-based financial advisor with fraud, accusing him and his firm of failing to disclose to clients a conflict of interest in an investment and lying to and misleading clients about a hedge fund he manages.
The defendant, Kevin O’Rourke, is the founder and president of Western Pacific Capital Management in Del Mar, Calif. He was named a top wealth manager by San Diego magazine in 2008 and 2010. He does not believe he did anything fraudulent and plans to fight vigorously to defend himself. However, this will cost him time, money and reputation. It takes a life time to build a reputation and just a few minutes to sully it.
Most advisors would never intentionally defraud their clients. They work very hard to do what is in their client’s best interests. They want to do all the right things, but sometimes it’s hard to know exactly what to do. The Rules are not always black and white, but subject to interpretation. That is why Advisors need knowledgeable compliance people to help them to make appropriate decisions in these gray areas. Unfortunately, knowledgeable compliance people are not inexpensive or plentiful. But they are worth their weight in gold when you compare their cost to the cost of enforcement. It has traditionally been difficult for compliance officers to measure their worth to the organization by the fine they did not receive or the deficiency that didn’t occur. But today’s action speaks to the need for compliance professionals to partner with Advisers to do what’s right for the client. Today should be the day that you thank your compliance team for protecting your reputation.
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About Red Oak Compliance Solutions
Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.