The U.S. Securities and Exchange Commission’s Marketing Rule 206(4)-1 under the Investment Advisers Act of 1940 as amended has now been in effect for several years, yet performance advertising continues to be one of the most frequently cited areas of concern during regulatory examinations. SEC Risk Alerts, enforcement actions, and examination observations demonstrate that many investment advisers continue to struggle with Rule 206(4)-1 compliance including presenting performance information in a manner that fully complies with SEC requirements and expectations.
Category Archives: Performance Advertising
Guidance for Advertising and Marketing
March 07, 2012
Advertising by investment advisors can generate significant risk exposure depending upon the advertising materials and circumstances.
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:
The United States Securities and Exchange Commission (“SEC”) recently issued an order instituting cease-and-desist proceedings against an investment adviser representative for misstating performance numbers on performance reports distributed to clients. According to the SEC’s order, the representative overstated client performance numbers and understated losses on individual portfolio performance reports provide to his clients. The investment adviser representative is now barred from associating with another investment adviser firm and required to pay a civil penalty of $60,000.
