The Securities and Exchange Commission today announced charges against Texas-based registered investment adviser Atom Investors LP for its failure to maintain and preserve off-channel communications in violation of the recordkeeping provisions of the federal securities laws. The Commission did not impose a penalty because Atom Investors self-reported the conduct, promptly remediated the violations, and provided substantial cooperation to Commission staff in an investigation of another entity.
According to the order, in 2021, the Commission staff issued a subpoena to Atom Investors for documents in connection with an investigation into a third party. In responding to the subpoena, Atom Investors discovered that, over a more than three-year period, it had failed to preserve records subject to the recordkeeping requirements of the federal securities laws, including records that were responsive to the Commission staff’s subpoena. This included communications by personnel at senior levels of the firm. Some of these records related to recommendations and advice to purchase or sell securities.
“This enforcement matter highlights the risk to investors when firms don’t comply with their recordkeeping obligations: because of Atom Investors’s longstanding failures to preserve required communications, including communications by Atom Investors’s senior personnel, we were hampered in our investigation into a third party,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “At the same time, this resolution shows that the full benefits of cooperation are available in recordkeeping matters. Atom Investors’s self-reporting and prompt remedial efforts weighed heavily in the Enforcement Division’s decision to recommend that the Commission not impose a penalty, which the Commission accepted. This resolution should serve as a model for other investment advisors that are not currently in compliance with federal recordkeeping requirements.”
The SEC’s order finds that Atom Investors violated the recordkeeping provisions of the federal securities laws. Without admitting or denying the SEC’s findings, Atom agreed to cease and desist from further violations of the securities laws and to a censure.
The SEC’s investigation was conducted by Wendy E. Pearson and Sarah S. Nilson, assisted by Stephen Kam, and supervised by Finola H. Manvelian, all of the Los Angeles Regional Office.
