Enforcement News: What Happens When Form ADV Statements Cannot Be Substantiated

By: Jeffrey M. Haber

The Securities and Exchange Commission (the “Commission”) regulates investment advisers, primarily under the Investment Advisers Act of 1940 (“Advisers Act”) and the rules adopted under that statute. One of the central elements of the regulatory program is the requirement that an investment adviser under the Advisers Act register with the Commission, unless exempt or prohibited from registration. Generally, only larger advisers that have $100 million or more of regulatory assets under management, or that provide advice to investment company clients, are permitted to register with the Commission. Smaller advisers register under state law with state securities authorities.

Exempt Reporting Advisers (“ERAs”) are a category of private fund advisers under the Advisers Act that are not required to register with the Commission. ERAs include advisers to venture capital funds, and advisers to private funds with less than $150 million in assets under management in the United States. The registration exemption for advisers to venture capital funds is Advisers Act Section 204(l); the registration exemption for private fund advisers is Advisers Act Section 204(m).

While ERAs are exempt from the registration requirements, any books or records they do maintain are subject to examination by the Commission under Section 204(a) of the Advisers Act. Section 204(a) of the Advisers Act provides that all records of investment advisers are “subject at any time, or from time to time, to such reasonable periodic, special, or other examinations by representatives of the Commission as the Commission deems necessary or appropriate in the public interest or for the protection of investors.”[1] 

Form ADV is the form used by investment advisers to register with the Commission and with state securities authorities. It consists of two parts, both of which are required to be filed with the Commission, and both of which are publicly available once filed: Form ADV Part 1 and Form ADV Part 2.

ERAs, while exempt from registration, are still required to file certain items in Form ADV Part 1. ERAs do not complete Part 2.

Part 1 asks for information about, among other things, an adviser’s business, amount of assets under management, ownership, and clients.

Form ADV is filed electronically with the Commission through the Investment Adviser Registration Depository (“IARD”), a secure Internet-based filing system that collects and maintains the registration, reporting, and disclosure information for investment advisers. The Financial Industry Regulatory Authority (“FINRA”), under contract with the Commission, is the developer and operator of the IARD system. Once filed, the Form ADV is available to the public through the Commission’s Investment Adviser Public Disclosure database (“IAPD”), located at https://adviserinfo.sec.gov.

The importance of the Form ADV disclosure regime and the Commission’s authority to examine records maintained by advisers and exempt reporting advisers were highlighted in Securities and Exchange Commission v. Wisdom Capital Management Group Ltd., an enforcement action filed by the Commission in 2024 in which a final judgment was recently entered.

Securities and Exchange Commission v. Wisdom Capital Management Group Ltd.

According to the Commission’s complaint, Wisdom Capital Management Group Ltd. (“Wisdom”) filed a Form ADV in December 2023 claiming that it qualified as an ERA under both of the Advisers Act’s principal private-fund exemptions. Specifically, Wisdom represented that it both advised only venture capital funds and acted solely as an adviser to private funds with less than $150 million in assets under management in the United States.

The filing contained information concerning Wisdom’s business operations and organizational structure. Wisdom identified a Wall Street address in New York City as its principal office and place of business and designated an individual, “Ricardo Jobity”, as both its Chief Executive Officer and Chief Operating Officer. It also reported that it had $10 million in private fund assets under management in the United States and disclosed two private funds that it purportedly advised. In addition, the filing represented that Wisdom was a public reporting company and supplied a Central Index Key (“CIK”) number typically associated with entities that make periodic filings with the SEC.

The Commission’s investigation allegedly revealed multiple inconsistencies with those representations. According to the Commission’s complaint, the occupant of the Wall Street address identified in the Form ADV had been located there for more than seven years and had no knowledge of either Wisdom or “Ricardo Jobity”. The Commission further alleged that a third-party registered investment adviser identified in Form ADV as providing information about Wisdom’s private funds did not report those funds in its own filings. Nor, according to the Commission, were the funds or their listed identification numbers found elsewhere in the SEC’s records. The Commission also alleged that searches of the SEC’s public-company database produced no information corresponding to either Wisdom or the CIK number provided in the filing.

According to the Commission, the matter was compounded by its inability to verify the information directly with the firm. The telephone number listed for Wisdom’s New York office used a San Antonio, Texas area code, and when Commission attorneys called the number on two occasions, the calls allegedly went unanswered and resulted only in a busy signal. The Commission also sent requests seeking books and records relating to the information reported on the Form ADV, including organizational records and information relating to the firm’s reported private-fund assets under management. According to the complaint, neither Wisdom nor “Jobity” responded to those requests.

By engaging in the conduct described in the Complaint, the Commission alleged that Wisdom violated Sections 204(a) and 207 of the Advisers Act of 1940. The Commission sought injunctive relief and civil monetary penalties.

On August 3, 2026, the court entered a final judgment by default. Pursuant to the judgment, (1) Wisdom was enjoined from future violations of Sections 204(a) and 207 of the Advisers Act, (2) Wisdom, its owners, and its executive officers were enjoined from filing a Form ADV as an Exempt Reporting Adviser, and Wisdom was ordered to pay a civil penalty of $1,152,316.  

Takeaway

Wisdom Capital serves as a reminder that Exempt Reporting Adviser status relieves an adviser of the obligation to register with the SEC, but it does not remove the adviser from the Commission’s oversight authority. ERAs remain subject to the Advisers Act’s examination provisions and must be prepared to substantiate the information they disclose in Form ADV filings. The enforcement action underscores that the Commission views Form ADV as a critical regulatory disclosure document and expects advisers relying on registration exemptions to provide accurate and verifiable information concerning their business operations, assets under management, personnel, and fund activities.

The enforcement action also demonstrates the breadth of the Commission’s authority under Section 204(a) of the Advisers Act. According to the Commission, when questions arose regarding the accuracy of Wisdom’s disclosures, the Commission’s staff requested books and records supporting the firm’s representations. The alleged failure to respond to those requests became an important aspect of the case. Wisdom Capital therefore illustrates that an adviser cannot rely on its exempt status as a shield against regulatory inquiry; records maintained by an ERA remain subject to SEC examination, and a failure to cooperate with those examination efforts can itself form the basis for enforcement action.

Finally, Wisdom Capital highlights the risks associated with inaccurate or unsupported Form ADV disclosures. The Commission alleged that multiple representations in Wisdom’s filing, including information concerning its address, management, assets under management, private funds, and public-company status, could not be verified and were inconsistent with information available from other sources. By pursuing claims under Section 207, which prohibits untrue statements of material fact in filings made under the Advisers Act, the Commission reinforced the principle that advisers claiming an exemption from registration must provide truthful and complete information in the filings that the statute requires them to make.

__________________________________

Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm. ___________________________________

[1] 15 U.S.C. § 80b-4(a).