MutualFundWire.com: SEC Sends Northern Lights a Wells Notice

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Friday, June 15, 2012

SEC Sends Northern Lights a Wells Notice

RIAs and others seeking entry into the mutual fund business have increasingly relied on "turn key" solutions based on the series trust model. Now, though, one of those providers is being looked at by the SEC.

Regulators have sent Northern Lights Fund Trust and certain of its current and former trustees and chief compliance officer a "Wells Notice". The notice means that the SEC staff is considering recommending that the SEC commmence preceedings against those named. The notice was revealed in a filing with the SEC made by the trust.

Gemini Fund Services is the firm supporting the Northern Lights Fund Trust. In the filing trust officials said they disagree with the SEC’s potential allegations, that they believe their actions complied with existing rules, and that they are cooperating with the SEC staff to seek a resolution.

A spokesperson for the trust told MFWire.com that "the principal allegations regarding advisory contract approvals relates to funds no longer sold by the Trust."

The spokesperson declined to identify the chief complience officer who also received the Wells Notice.

"As a market leader, we always look to enhance our internal procedures and ensure our processes are fully compliant with all rules and regulations," the spokesperson stated.

A Northern Lights Fund Trust spokesperson confirmed to MFWire that the Wells Notice from the SEC involves funds "no longer sold by the trust."

A source familiar with the matter told MFWire that the matter being explored occured prior to 2010.

"It sounds to me like it's a relatively picayune issue that the SEC was looking at," that source said. "We weren't terribly concerned when they revealed the type of issue the SEC was looking at."

This is not the first time that Northern Lights Fund Trust has disclosed issues for a fund in its series. The current notice comes a year after Gemini Fund Services inadvertantly allowed an advisory agreement for Toews Hedged Emerging Markets Fund to lapse. The lapse was an oversight, according to a filing made in July of 2011.

Toews Corporation CEO Phil Toews said in an interview that the current issue at Northern Lights Fund Trust has nothing to do with the Toews fund and that the fund continues to use Northern Lights as a distributor.

The text of the most recent filing is:

On May 30, 2012, NLFT and certain of its current and former trustees and chief compliance officer (collectively, the "Trust") received a Wells notice from the staff of the U.S. Securities and Exchange Commission (the "SEC"). A Wells notice is neither a formal allegation nor a finding of wrongdoing. A Wells notice discloses that the SEC staff is considering recommending that the SEC commence proceedings against a party, alleging violations of certain provisions of the Federal securities laws. The Wells notice received by the Trust relates primarily to the process by which certain investment advisory agreements between NLFT (on behalf of a small number of funds in the Trust) and their advisers were approved, and the disclosures regarding the same. Those specific funds involved are no longer offered for sale by the Trust. The Wells notice also alleges separate books and records and compliance violations. The Trust disagrees with the SEC’s potential allegations and believes its actions complied with existing rules. The Trust is cooperating with the SEC staff to seek a resolution to this matter.