Recently, the Securities and Exchange Commission (SEC) took decisive action against nine registered investment advisers for violating the Marketing Rule.

Concise Breakdown of the Charges, Violation Findings, And Settlement Terms for Registered Investment Advisers

Here’s a concise breakdown of the charges, violation findings, and settlement terms unveiled by the SEC for RIA’s:

Charges Against Investment Advisers

• The SEC announced charges against nine registered investment advisers for promoting hypothetical performance on their websites to the general public without following required policies and procedures under the Marketing Rule.

Violation Findings

• The SEC found that each charged firm advertised hypothetical performance to large audiences on their websites without having the necessary policies and procedures in place. It is important to note that under the Marketing Rule, which was amended in December 2020, firms are prohibited from using hypothetical performance in ads without policies ensuring its relevance to the target audience’s financial situation and investment goals and without appropriate disclosures.
• Additionally, two firms were charged for not keeping copies of their advertisements as required.

Settlement Terms

• The charged firms, without admitting or denying the findings, agreed to:
• Accept censure.
• Stop violating the provisions.
• Commit to not advertising hypothetical performance without proper policies.
• Pay civil penalties ranging from $50,000 to $175,000.
• All nine firms agreed to settle the charges and collectively pay $850,000 in penalties.

This announcement underscores the SEC’s commitment to enforcing compliance within the investment advisory industry, particularly regarding advertising practices. It serves as a reminder to firms to adhere to regulatory standards and implement robust policies and procedures to protect investors’ interests. By outlining the terms of settlement, the SEC aims to promote transparency and accountability in the financial markets, ultimately fostering investor trust and market integrity.