The US Securities and Exchange Commission has punished an investment advisory firm, two owners, and a former chief compliance officer for falling into the habit of breaking custody rules of which they had formerly been purged.

The parties and the SEC have agreed to settle charges with nobody admitting or denying guilt. They were reprimanded for breaking the SEC's so-called custody rule in 2010 but did not mend their ways.

Sands Brothers Asset Management LLC and co-founders Martin and Steven Sands agreed to pay a $1 million penalty and will be suspended for a year from raising money from new or existing investors. They must also have a compliance monitor for three years.  Former chief compliance officer Christopher Kelly, who also served as chief operating officer, agreed to pay a $60,000 penalty and will be suspended for one year from acting as a CCO or "appearing or practising before the SEC as an attorney," whatever that might mean.

The custody rule requires firms to pay an independent party to verify the existence of assets in cases where those firms can access or control client money or securities, the better to ensure that investors know that they are protected from sharp practice and/or theft. Sands Brothers and its co-founders first landed in the SEC’s crosshairs in 2010 when they last broke the custody rule and had to pay a $60,000 penalty. They faced new charges in an administrative proceeding instituted last October when the SEC alleged that they were repeatedly late in providing investors with audited financial statements of their private funds.

“There is no place for recidivism in the securities markets,” said Andrew Calamari, the director of the SEC’s New York regional office.