The SEC expects advisers to follow their stated policies and procedures and to exercise reasonable supervision over their employees. It also expects advisers to act promptly and properly even when they merely suspect potential trouble. In yet another example of these expectations, the SEC recently claimed that an SEC-registered investment adviser failed to act promptly when alerted to irregularities, on separate occasions, by a compliance consultant and its broker. As a result, the adviser failed to discover that one of its investment adviser representatives had been engaged in a long-running cherry picking scheme. This article analyzes the settlement order with the adviser, as well as the parallel settlement order with the representative. See “The Duty to Supervise: Recent SEC Enforcement Actions Claim Violations by Broker-Dealers and Investment Advisers (Part One of Three)” (Sep. 6, 2018).