SEC Marketing Rule Violations | 5 RIAs Charged
SEC Releases
Introduction
The SEC announced on Friday, April 12th, that they have charged five (5) Registered Investment Advisers (“RIAs”) for Marketing Rule Violations.
This was focused on Violations of the Amended Marketing Rule, and in total, these penalties combined to be $200,000.
Co-Chief of the SEC Enforcement Division’s Asset Management Unit, Corey Schuster, made it clear this is only the beginning and that the SEC will continue to have these targeted initiatives making sure RIAs fully comply with their obligations under the Marketing Rule. He also focused on stating that protecting investors is a continued priority and the Marketing Rule provisions are crucial for that protection from misleading advertising claims.
What was Discovered by the SEC?
According to the SEC:
- One RIA in particular also violated other regulatory requirements, such as:
- Making false and misleading statements in advertisements
- Advertising misleading model performance
- Unable to substantiate performance shown in its advertisements
- Failing to enter into written agreements with people it compensated for endorsements
- Recordkeeping and compliance violations making misleading statements about its performance to a Registered Investment Company (“RIC”) client and that the misleading statements were included in the client’s prospectus filed with the Commission.
- Five (5) Firms advertised Hypothetical Performance to the general public on their websites.
- It was discovered that there was a failure to adopt and implement policies and procedures reasonably designed to ensure that the Hypothetical Performance was relevant to the likely financial situation and investment objectives of each advertisement’s intended audience, as required by the Marketing Rule.
Vigilant’s Conclusion
This was a clear indication made by the SEC that this is just starting and more is to come regarding the Marketing Rule and complying with it. Investor protection is at the forefront of focus by the SEC and it is pivotal to comply with the Marketing Rule being careful in your advertisements.
We anticipate the SEC to expand upon their focus regarding the elements of the Rule expanding beyond the initial policies and procedures enforcement.
Our Director, Thayne Gould, recently provided his insights on Complying with the Marketing Rule 1 Year Later, which covers three (3) keys to success and additional areas of scrutiny that can be found here.
Having an experienced Advertising and Marketing Review team is top priority, even if it is for adding an additional layer having a “second set of eyes” to support your review process.
Please reach out to us if you are in need of support for review of your Advertising and Marketing materials.