The Minneapolis investment consulting firm Jeffrey Slocum & Associates is no more, its assets sold last year to a Canadian firm called Pavilion Financial. But it’s clearly not forgotten, as unsolicited e-mails out of the Twin Cities investment community still are dribbling in that point to a Securities and Exchange Commission cease-and-desist order.

Disclosed in February, this regulatory action details rules compliance lapses at the Slocum firm including having staffers accept tickets from an investment manager to the Masters golf tournament.

Getting taken to a golf tournament might be no big deal in a lot of industries, but founder Jeff Slocum always said his firm would be above that sort of thing, to remain an unbiased adviser to endowments and other clients. The firm had this promise in its marketing materials: it had “never, not once, taken even so much as a nickel from an investment manager.”

A ticket to the Masters is notoriously hard to get, worth maybe 25,000 nickels. So why risk damage to the brand — and a pounding by a regulator — for something as trivial as golf tickets?

Slocum, who is 65, has left the firm now that it’s part of Pavilion but said he intends to stay active in business. He declined this week to rehash the substance of the SEC’s action.

“All of us at the firm spent 31 years trying to develop, and deserve, a reputation for probity and integrity,” Slocum said. “To have something happen that could cause anyone to question that integrity just crushes me. I would love to have an indignant finger to point at someone … But the fact is I was the one who made the call.”

He’s alluding to not reacting more strongly to the gift policy problem with the golf tickets when he learned of it and then later volunteering the issue to the SEC in a routine audit. He obviously never anticipated how it could lead to the end of his firm as an independent company.

A misunderstanding over the gift policy wasn’t the only thing the SEC put in its final order, describing also what it called “misleading performance advertising” at the firm, called JSA in the SEC order. That sure sounds serious, too, but once again it’s more puzzling than anything else.

To the SEC any hint in money management of ginned up performance numbers is a big deal, but JSA wasn’t really a traditional money management firm. It was a consultant. Its main business was helping owners of big pools of money, like pension plans and endowments, allocate their money to different kinds of investment strategies and to different money managers.

At the time of the sale JSA was an adviser to more than 120 clients with about $125 billion worth of assets. Each client could have had a different set of goals and limits, so maybe the fairest way to summarize is that it either didn’t have a track record at all, or maybe it had 120 of them.

In trying to get new accounts, though, the staff had the challenge of showing the value it would provide, as an adviser standing between the money managers and the client. One solution was what was called, in the SEC order, the “Value Added Chart.”

This chart was meant to show how well the firm’s recommended list of money managers performed. These charts were based on fact but still hypothetical, in that they weren’t summarizing actual results of any client’s investment account. The real problem to the SEC was what the firm explained about its methodology, which wasn’t nearly enough.

Some employees did add explanatory footnotes in marketing materials, but the “vast majority” of these charts went out the door without them, according to the SEC. And the really stunning part of this story as told in the SEC order is a finding that the firm had “no written policies and procedures regarding the review of marketing materials or the use of performance data in marketing materials.”

It did have an informal practice of having the general counsel review proposals before they went out. The general counsel actually flagged this footnoting problem at least once.

Here’s one weakness of relying on an informal process, though. According to the SEC, after disclosures were beefed up in one chart, no one thought to add the additional explanation to the master template that other JSA consultants used.

Jeff Slocum’s name doesn’t come up at all in this narrative about chart disclosures, except at the end when the SEC held him, as majority owner and president, responsible for it.

It’s a fair conclusion. If any CEO knows the SEC is eventually coming, it would be a good idea to write down the process for ensuring full disclosures are in the marketing materials and to make sure all employees stick to it every time.

It’s apparent after reading through this SEC order that the SEC’s investigation is what led to the sale to Pavilion last fall. The deal was referred to in the SEC order as an asset sale, not the sale of the firm and its stock, and the distinction is important. By not buying the stock of JSA, Pavilion managed to avoid buying this problem with the SEC.

Slocum acknowledged the obvious in a conversation, that an asset sale was not how he had planned for his eventual exit from the firm he founded.

It is remarkable story, how a champion of high-road business practices ended his career with an SEC cease-and-desist order over free tickets to a golf tournament he didn’t attend and for sloppy footnoting of research work he apparently didn’t oversee.

In searching for lessons in Slocum’s story for business owners it’s hard to miss the biblical admonition to keep one’s pride in check, lest it lead to destruction. It could be, though, that here we have another well-known entrepreneur who turned out to be like most of us — good at his work, just far from perfect.

The price paid for Slocum’s imperfection just happened to be very high. 612-673-4302