The SEC recently issued an order against an investment adviser and its founder and CEO, citing a host of compliance failures arising out of the respondents’ alleged failure to supervise an investment adviser representative who defrauded firm clients. The SEC’s allegations, if proven, would show a near complete failure by the respondents to comply with fundamental compliance obligations, including the duties to supervise representatives; adopt and implement reasonable compliance policies and procedures; follow up on red flags; address deficiencies cited by the SEC; and supervise the individuals to whom compliance duties are delegated. This article details the facts and circumstances leading up to the proceeding, as well as the SEC’s specific allegations. See our three-part series on the duty to supervise: “Recent SEC Enforcement Actions Claim Violations by Broker-Dealers and Investment Advisers” (Sep. 6, 2018); “Conduct Proper Trade and Electronic Communications Surveillance” (Sep. 13, 2018); and “Respond to Red Flags; Implement Reasonable Policies and Procedures; and Conduct Adequate Training” (Sep. 20, 2018).