(Article from Registered Funds Regulatory Update, October 2023)
For more information, please visit the Registered Funds Resource Center.
The SEC recently settled charges against ten registered investment advisers for, among other things, advertising hypothetical performance to the general public on their websites without adopting and/or implementing policies and procedures required by the newly adopted Marketing Rule under the Advisers Act. All 10 settlements were announced before the one-year anniversary of the Marketing Rule’s November 4, 2022 compliance date.
The relevant portion of the Marketing Rule prohibits a registered investment adviser from including any hypothetical performance in its advertisements unless, among other things, it “[a]dopts and implements policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement.” The Orders generally found that the advisers failed to adopt and implement the required policies and procedures but still disseminated hypothetical performance in advertisements that were posted to their public websites thereby making the information available to mass audiences without the requisite tailoring.
Without admitting or denying the findings, each of the advisers agreed to a cease-and-desist order, removing or restricting access to hypothetical performance on their websites and social media, undertakings to make certain certifications, censure, and civil monetary penalties ranging from $50,000 to $175,000 each, for a total of $850,000 in combined penalties.
In the Matter of Titan Global Capital Management USA LLC, SEC Admin File No. 3-21569 (Aug. 21, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6380.pdf.
In the Matter of Banorte Asset Management, Inc., SEC Admin File No. 3-21636 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6404.pdf.
In the Matter of BTS Asset Management Inc., SEC Admin File No. 3-21637 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6405.pdf.
In the Matter of Elm Partners Management LLC, SEC Admin File No. 3-21638 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6406.pdf.
In the Matter of Hansen & Associates Financial Group Inc., SEC Admin File No. 3-21639 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6407.pdf.
In the Matter of Linden Thomas Advisory Services, LLC, SEC Admin File No. 3-21640 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6408.pdf.
In the Matter of Macroclimate LLC, SEC Admin File No. 3-21641 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6409.pdf.
In the Matter of McElhenny Sheffield Capital Management, LLC, SEC Admin File No. 3-21642 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6410.pdf.
In the Matter of MRA Advisory Group, SEC Admin File No. 3-21643 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6411.pdf.
In the Trowbridge Capital Partners LLC, SEC Admin File No. 3-21644 (Sept. 11, 2023), available at: https://www.sec.gov/files/litigation/admin/2023/ia-6412.pdf.