What if you have no books or records?

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This cautionary tale must be filed under the heading, “You can’t make this stuff up!”

It was a tough Independence Day weekend for Timothy F. Sexton, Jr., a resident of Dix Hills, NY and the chief executive officer and owner of Bantry Bay Capital LLC, an investment adviser formerly registered with the Securities and Exchange Commission (SEC).

On Friday, July 1st, the SEC announced that it filed a subpoena enforcement action in the U.S. District Court for the District of Colorado against Sexton ordering the CEO of the Wyoming investment advisor appear at a hearing for failure to produce business records.

No there…there!

At issue, according to the SEC’s application and supporting papers are potential violations of the federal securities laws arising from Bantry Bay’s failure to produce the required books and records in response to its examination by SEC examiners. Moreover, the SEC’s application alleges that when its examiners actually visited Bantry Bay’s reported principal office and place of business in Jackson, Wyoming on November 16, 2015, all they found was a UPS Store at that location. No investment advisory business.

It was only after the SEC examiners sent repeated requests to Bantry Bay for copies of its books and records, that the advisory firm filed a Form ADV-W (December 22, 2015), to withdraw its registration as an investment adviser. It did not respond to the SEC’s requests for documents. Sexton was identified in that form as the custodian of Bantry Bay’s books and records. So the SEC turned its attention to him.

What if no records ever existed?

Patrina (and the SEC) may never know. As part of its investigation to determine whether, among other things, Bantry Bay even kept and maintained books and records for its investment advisory business, staff in the SEC’s Denver Regional Office served Sexton with a subpoena in May 2016, demanding he produce certain documents.

Sexton did not respond. So, the SEC ratcheted up the pressure, requesting an order from the federal district court to compel Sexton to comply and produce the documents. Again, radio silence.

Pushing forward, the federal district court has issued an order requiring Sexton to appear at a hearing to…explain why he should not be ordered to produce records to the SEC. Will he show? Who knows? Meanwhile, the SEC saga is continuing, albeit without formally concluding “that any individual or entity has violated the federal securities laws.”

 

No one is immune from regulation…

…assuming you are a real person and a real firm. If you are charged with compliance, you know you’re facing increased oversight which requires you to juggle more paper, more files, more data. Regulatory compliance requirements are getting more all-consuming and complying can often times feel like an undertaking without end. If your compliance function is under pressure to do more with less, what are the options?

Let’s talk (212-233-1155). Ask about Patrina’s comprehensive compliance solutions and compliance recordkeeping specifically designed for the financial services community.

Let’s talk.

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