Atlas Capital Management Corp

Allegations: ALLEGATIONS AGAINST FIRM WERE RELATED TO NOT DIRECTING AN UNAFFILIATED THIRD PARTY FIRM TO OPEN CUSTODIAL ACCOUNTS FOR CLIENTS WHICH COULD ACCEPT A LESS EXPENSIVE MUTUAL FUND SHARE CLASS AND LACK OF ADEQUATE POLICIES AND PROCEDURES. Status: Final Sanction Detail: NONE Summary: ON OCTOBER 16, 2017, ATLAS EXECUTED A CONSENT ORDER WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC"), WHICH INCLUDED THE FIRM'S CONSENT TO ENTRY OF AN ORDER INSTITUTING ADMINISTRATIVE AND CEASE-AND-DESIST PROCEEDINGS, MAKING FINDINGS, AND IMPOSING REMEDIAL SANCTIONS AND A CEASE-AND-DESIST ORDER. FROM 2012-2016, ATLAS RECEIVED NUMEROUS CLIENT REFERRALS FROM AN UNAFFILIATED FIRM. THE UNAFFILIATED FIRM WOULD TYPICALLY RECOMMEND AND OPEN SERVICE CLASS CUSTODIAL ACCOUNTS FOR CLIENTS, WHICH ACCOUNTS COULD ONLY ACCEPT SERVICE CLASS MUTUAL FUND SHARE CLASSES THAT PAID 12B-1 COMPENSATION AND SHAREHOLDER SERVICE FEES TO THE REGISTERED REPRESENTATIVES OF THE UNAFFILIATED REFERRING FIRM. BECAUSE THE TYPE OF ACCOUNT OPENED WITH THE MUTUAL FUND DISTRIBUTOR DICTATED THE TYPE OF SHARE CLASS THAT COULD BE PURCHASED, THE SELECTION AND OPENING OF A PARTICULAR ACCOUNT TYPE BY THE REFERRING FIRM WAS TANTAMOUNT TO THE SELECTION OF A PARTICULAR SHARE CLASS. ATLAS HAD NO AUTHORITY OR ABILITY WHATSOEVER TO SELECT OR CHANGE THE TYPE OF CUSTODIAL ACCOUNT MAINTAINED BY THE CLIENT AND, AS A RESULT, ONCE A SERVICE CLASS ACCOUNT WAS OPENED, ATLAS HAD NO AUTHORITY OR ABILITY TO SELECT LESS EXPENSIVE MUTUAL FUND SHARE CLASS OPTIONS. AS SUCH, AFTER A SERVICE CLASS ACCOUNT WAS OPENED, ATLAS INVESTED THE REFERRED CLIENTS IN THE ONLY SHARE CLASS AVAILABLE FOR SUCH ACCOUNTS: THE SERVICE CLASS MUTUAL FUND SHARE CLASS. MUTUAL FUND SHARE CLASSES WHICH PAY 12B-1 AND/OR SERVICE FEE COMPENSATION TYPICALLY ARE SUBJECT TO HIGHER EXPENSE RATIOS THAN THOSE WHICH DO NOT PAY SUCH COMPENSATION. THEREFORE, EVEN THOUGH ATLAS DID NOT RECEIVE ANY PORTION OF THE 12B-1 COMPENSATION OR SERVICE FEES, AND DID NOT SELECT THE INITIAL OR ONGOING SERVICE CLASS ACCOUNT TYPE, BY INVESTING THE REFERRED CLIENTS IN SUCH SERVICE CLASS SHARES, ATLAS DID NOT INFORM CLIENTS OR THE UNAFFILIATED FIRM OF THE ADVISABILITY OF UTILIZING A LESS EXPENSIVE SHARE CLASS. AS A RESULT, THE TERMS OF THE CONSENT ORDER INCLUDE REPRESENTATIONS THAT ATLAS WILLFULLY VIOLATED SECTION 206(2) OF THE ADVISERS ACT OF 1940, WHICH PROHIBITS "ANY TRANSACTION, PRACTICE, OR COURSE OF BUSINESS WHICH OPERATES AS A FRAUD OR DECEIT UPON ANY CLIENT OR PROSPECTIVE CLIENT," AS WELL AS SECTION 206(4) OF THE ACT AND RULE 206(4)(7) THEREUNDER, WHICH REQUIRES ADVISORY FIRMS TO ADOPT AND IMPLEMENT WRITTEN POLICIES AND PROCEDURES REASONABLY DESIGNED TO PREVENT VIOLATIONS OF THE ACT AND ITS RULES, DUE TO: (1) ATLAS'S FAILURE TO INFORM CLIENTS AND THE REFERRING FIRM THAT THE IMPACTED CLIENTS WERE NOT INVESTED IN THE LEAST EXPENSIVE MUTUAL FUND SHARE CLASSES, SINCE THE CLIENT AND REFERRING FIRM WERE THE ONLY PARTIES WHO COULD SELECT THE CUSTODIAL ACCOUNT TYPE; AND (2) THE FIRM'S FAILURE TO HAVE COMPLIANCE PROCEDURES WHICH ADDRESSED THE EVALUATION OF ANNUAL FEES OR EXPENSES ASSOCIATED WITH MUTUAL FUND SHARE CLASSES. NOTE THAT A "WILLFUL" VIOLATION DOES NOT REQUIRE THAT ATLAS BE AWARE THAT IT IS IN VIOLATION OF THE ADVISERS ACT OF 1940 OR THE RULES PROMULGATED THEREUNDER. PURSUANT TO THE CONSENT ORDER, ATLAS AGREED TO CEASE AND DESIST FROM COMMITTING OR CAUSING VIOLATIONS OF THE ABOVE REFERENCED SECTIONS OF THE ADVISERS ACT AND THE RULES PROMULGATED THEREUNDER, WAS CENSURED, AND WAS SUBJECT TO A CIVIL MONEY PENALTY IN THE AMOUNT OF $80,000. ON NOTIFICATION BY THE SEC, ATLAS TOOK IMMEDIATE CORRECTIVE ACTION BY CEASING TO INVEST CLIENTS IN THE SERVICE CLASS SHARES AND BY DIRECTING THE UNAFFILIATED FIRM TO CONVERT ALL SERVICE CLASS ACCOUNTS TO ACCOUNT TYPES THAT COULD SUPPORT LOWER COST MUTUAL FUND SHARE CLASSES. ATLAS HAS NOT INVESTED ANY CLIENTS IN SERVICE CLASS SHARES SINCE THIS TIME.