Category Archives: Advertising
 

SEC Penalizes Investment Advisory Firms for Spreading False Performance Claims

September 02, 2016

The U.S. Securities and Exchange Commission (SEC) recently fined thirteen investment adviser firms for promoting performance information for a third party investment product that the SEC alleges the investment adviser firms knew, or should have known, was false. At the heart of the enforcement actions were claims made by a third party money manager who purported to have a time tested investment program that consistently and greatly exceeded standard market returns. The SEC alleged that in fact, the mathematical algorithm underlying the investment program had only been in existence a short period of time and the third party money manager was using selective, back-tested (“hypothetical”) data to promote its new program. Compounding the problem, the investment performance calculations contained an error that further inflated the product’s artificial performance statistics. Despite being notified of the calculation error and knowing the algorithm’s investment performance data was not from actual accounts, the SEC alleged that third party money manager claimed in marketing materials given  to investment adviser firms and investment adviser firm clients that the data was genuine. Click here to read the SEC enforcement action on the third party money manager.

Continue Reading

Websites a Common Place for Advertising Deficiencies

June 02, 2015

Nearly all investment adviser firms have at least one if not more websites and their prevalence continues to grow, but have you reviewed your investment adviser firm’s website recently? Websites are a great way to advertise your firm’s business and attract new clients, but they can also be a treasure trove for securities regulators.

Continue Reading

SEC Guidance for Investment Advisers on the Testimonial Rule and Social Media

July 08, 2014

Under Rule 206(4)-1(a)(1) of the Investment Advisers Act of 1940 (Advisers Act), an investment adviser is prohibited from publishing, circulating, or distributing any advertisement that refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report or other service rendered by the investment adviser.  With today’s wide spread use of social media, there has been a lot of concern among investment advisers regarding what would constitute a testimonial when using social media.  In March 2014, the U.S. Securities and Exchange Commission (SEC), Division of Investment Management, issued a Guidance Update to provide some guidance on the testimonial rule and social media.  Through this guidance, the SEC Division of Investment Management is seeking “to clarify application of the testimonial rule as it relates to the dissemination of genuine third-party commentary that could be useful to consumers.”

Continue Reading

Investment Advisers Should Make Sure They Can Back-Up Statements and Claims Made in Advertising

June 13, 2012

Investment advisers must be cautious when it comes to the statements and claims used in advertising and marketing materials and this does not just pertain to performance claims. Investment advisers must avoid all statements or claims that are unsubstantiated or that cannot be proven with material facts.  Investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) must ensure that all advertising and marketing material complies with Rule 206(4)-1 under the Investment Advisers Act of 1940 (“Investment Advisers Act”). Many state investment adviser regulations follow similar regulatory guidelines as those outlined in Rule 206(4)-1. Under SEC Rule 206(4)-1(a)(5), investment advisers are expressly prohibited from publishing, circulating and distributing any advertisement, “which contains any untrue statement of a material fact, or which is otherwise false or misleading

Continue Reading

Enforcement Actions Related to Advertising / Marketing for Investment Advisors

May 30, 2012

Marketing materials can be very helpful in attracting business for an investment advisor, but investment advisors should be aware of the regulatory requirements that apply to the use of marketing materials. Common issues with investment advisory marketing materials include using marketing materials that include testimonials (which investment advisors are generally prohibited from using); publishing past recommendations (without following the restrictions and disclosure requirements for publishing past recommendations); using language that makes promises or guarantees; and making untrue or misleading statements.

Continue Reading

Performance Advertising for Investment Advisers

February 22, 2012

Although not specifically prohibited, investment advisers should be cautious when using performance data in advertising as the securities regulator may claim that the performance advertisement contains untrue statements of a material fact or is otherwise false or misleading. The U.S. Securities and Exchange Commission (“SEC”) has explained that advertisements shall be considered false or misleading depending on the facts and circumstances involved in its use, including:

Continue Reading