Nine Investment Advisers Settle SEC Charges for False Advertising

In separate enforcement actions, nine investment advisers settled SEC charges for "disseminating advertisements that included untrue or unsubstantiated statements of material fact or testimonials, endorsements, or third-party ratings that lacked required disclosures." 

The SEC found that the firms improperly marketed themselves for the following reasons:

• the first firm disseminated an advertisement on its website claiming it was rated a "Top 12 Financial Advisor," when it was actually rated as a "Top 1200 Financial Advisor." It also misrepresented a third-party rating by calling itself a "Top 100 Women's Advisor" instead of "Top 100 Women Financial Advisors." The firm also failed to disclose the date and period of the third-party rating.
• the second firm claimed on its website that it was "free from conflicts of interest" and could provide "unbiased, conflict-free" services. However, the firm had disclosed various conflicts of interest in its official filings.
• the third firm published an advertisement stating that one of its investment adviser representatives offered "conflict-free advice," when the firm had disclosed multiple conflicts of interest in its official documents.
• the fourth firm used endorsements from an athletic program to market itself as the "Official Wealth Management Partner" of the program, even though the program was not a client. The advertisements, displayed on multiple platforms, were considered endorsements because the firm was compensated for them. The firm further published testimonials from individuals who were either no longer clients or whose client status couldn't be verified, but presented them as current testimonials.
• the fifth firm published a statement on its website that one of its DBA firms was a "true fiduciary" that "eliminat[ed] conflicts of interest," however, the firm acknowledged various conflicts of interest in its official disclosures.
• the sixth firm published an advertisement that identified its principal as one of Reuters AdvisePoint's "Top Advisers" in the United States, but failed to disclose that this award was received over 16 years ago. Other marketing materials similarly lacked appropriate time disclosures.
• the seventh firm misrepresented its status as a "Barron's Top Advisor" without providing the date of the rating (which was received in 2018). The firm also falsely claimed that its CEO had been named one of the top wealth managers by readers of a magazine for 14 consecutive years, even though the selection was made by a third party using a different methodology.
• the eighth firm highlighted outdated awards for its principal, who was recognized by Fortune Magazine's "All-Star Analysts" and Smart Money Magazine's "Power 30" but failed to disclose the dates of these awards, which were from 2001-2002 and 2002-2004, respectively.
• the ninth firm falsely claimed membership in a fictitious organization called "Fiduciary Firm" and used a non-existent logo in its advertisements. The firm also asserted that it provided services with "no conflict of interest," despite having disclosed conflicts in other filings.

The SEC found that the firms violated Advisers Act Section 206(4) ("Prohibited transactions by investment advisers") and Rule 206(4)-1(a) ("Investment Adviser Marketing, a/k/a the Marketing Rule").

To settle the charges, the firms agreed to (i) review their advertisements and confirm that presently disseminated ads are in compliance with the requirements of the Marketing Rule and (ii) pay respective civil money penalties in the amounts of $150,000; $70,000; $80,000; $85,000; $90,000; $325,000; $60,000; $295,000; and $85,000.