The U.S. Securities and Exchange Commission has sanctioned a Dutchess County investment adviser for violating a rule designed to protect clients from misuse or misappropriation of their assets.
Farnham Fisher Collins, 88, of Millbrook, consented to censure and a $65,000 penalty, according to a cease-and-desist order issued on Sept. 9.
Collins was sole owner, operator and chief compliance officer of Collins Capital Management, an unincorporated investment adviser in Millbrook. As of February 2023, the firm had 18 clients and $98 million in assets under management.
The case concerns violations of the custody rule, from 2012 to 2023, that governs how investment advisers handle client assets over which they have direct or indirect control.
The rule requires investment advisers to ensure that a qualified custodian maintains the assets, for example. Clients must be notified in writing when accounts are opened on their behalf, and they must receive quarterly reports. And the custodian must arrange for an independent public accountant to  conduct a surprise examination once a year to verify client assets.
Last year, according to the cease-and-desist order, the SEC found that Collins had served as a co-trustee and investment adviser of trusts formed in l998 and 2012. The trust agreements gave the trustees absolute discretion to buy and sell securities and real estate and personal property. They could mortgage the property, dispose property, and make distributions.
In practice, the order states, Collins could obtain possession of trust assets without the consent of the co-trustees.
As a trustee, he had to follow the custody rule and to submit to surprise examinations by an accountant. At no time since 2012, the SEC says, did Collins arrange for surprise examinations of the two trusts.
Collins also did not implement written policies and procedures designed to prevent violations of the custody rule.
The cease-and-desist order does not say that any client assets were actually misappropriated.
The agency presented Collins with its findings in August 2023. Four months later, he withdrew his SEC registration and Collins Capital ceased operations.
