SEC Charges Investment Adviser and Orders It to Repay Clients Harmed by Undisclosed Conflicts

ADMINISTRATIVE PROCEEDING
File No. 3-20604

September 27, 2021 - The Securities and Exchange Commission today announced settled charges against registered investment adviser Cowen Prime Advisors LLC for breaches of fiduciary duty arising from Cowen's receipt of undisclosed compensation in connection with cash sweep money market funds.

According to the SEC's order, Cowen received revenue sharing payments from its unaffiliated clearing broker as a result of sweeping its advisory clients' cash into certain money market funds instead of available lower-cost money market funds for which it would not have received any revenue sharing. As stated in the order, Cowen breached its fiduciary duty by failing to provide full and fair disclosure of its money market fund selection practices, and related conflicts of interest, to its advisory clients. The order also finds that, while Cowen determined that a government money market fund was an appropriate cash sweep vehicle for its advisory clients, when selecting particular government money market funds, it failed to consider alternative government money market funds offered by its clearing broker. As set forth in the order, Cowen also failed to adopt and implement policies and procedures designed to prevent violations of the federal securities laws regarding its money market fund selection practices.

The SEC's order finds that Cowen willfully violated Sections 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-7 thereunder. Without admitting or denying the SEC's findings, Cowen will pay disgorgement of $579,232, prejudgment interest of $74,647, and a civil penalty of $115,000. Cowen has agreed to a cease-and-desist order, to be censured, and to distribute the funds to harmed investors.

The SEC's investigation was conducted by Marilyn B. Ampolsk and supervised by Corey A. Schuster, both from the Asset Management Unit. John D. Farinacci, an industry expert in the Asset Management Unit, assisted with the investigation.