Investment Advisers Fined for Failing to Ensure Relevancy of Hypothetical Performance Ads
Commentary by Steven Lofchie
Nine investment advisers settled separate charges with the SEC for advertising hypothetical performance on their websites without ensuring that the information was relevant to their intended audiences.
In the Orders (see Primary Sources below,) the SEC stated that the investment advisers failed to implement policies and procedures to ensure that the advertisements on their websites were relevant to their respective audiences' financial situations and investment objectives. The SEC found the investment advisers in violation of Advisers Act Section 206(4) ("Prohibited transactions by investment advisers") and Rule 206(4)-1(d) ("Investment Adviser Marketing").
To settle the charges, the advisers agreed to (i) cease and desist from further regulatory violations, (ii) censures and (iii) respective fines ranging from $50,000 to $175,000 which when combined totaled to $850,000.
Commentary
The concept seems understandable, but the SEC should provide some further explanation of the specific violations by each adviser.