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(Article from Registered Funds Regulatory Update, October 2024)

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The SEC recently settled charges against a RIA for publicly advertising hypothetical performance on its website without adopting and implementing policies and procedures required by the so-called “Marketing Rule” under the Advisers Act.

According to the Order, the RIA advertised quarterly performance reports on its website that included hypothetical performance information derived from its model portfolios that were deemed by the SEC to be “disseminated to the general public rather than to a particular intended audience” in violation of the Marketing Rule. Further, the RIA’s policies and procedures failed to specify how it would identify the intended audience of its advertisements or ensure hypothetical performance was relevant to the likely financial situation and investment objectives of the intended audience. The Order therefore found that the RIA willfully violated the Marketing Rule as well as the antifraud provisions of the Advisers Act. Without admitting or denying the findings, the RIA consented to a cease-and-desist order, a censure, and a civil monetary penalty of $430,000.

In the Matter of The Pacific Financial Group, Inc., SEC Admin. File No. 3-21987 (Aug. 9, 2024), available at: https://www.sec.gov/files/litigation/admin/2024/ia-6646.pdf.