(Article from Registered Funds Regulatory Update, October 2024)
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On September 9, 2024, the SEC announced that it settled charges against nine RIAs for alleged violations of the so-called “Marketing Rule” under the Advisers Act. These actions, announced approximately one year after the SEC’s first round of similar Marketing Rule actions, affirm the SEC’s continued focus on and commitment to enforcing compliance with the Marketing Rule following its implementation on November 4, 2022.
The Orders alleged various Marketing Rule violations, including that one or more RIAs violated the Marketing Rule by: (i) publishing advertisements with untrue statements about third-party ratings; (ii) posting an advertisement falsely claiming that the RIA was a member of a “fiduciary firm” that did not exist; (iii) disseminating advertisements that (x) stated the RIAs provided conflict-free advisory services without substantiation and in contradiction to other disclosure, (y) stated a firm principal received an award, which statement and award the RIA could not substantiate, and (z) contained “testimonials” that were not from existing clients; (iv) advertising endorsements without including required disclosures (e.g., that the “endorser” was a paid, non-client); and (v) including third-party ratings, some of which were more than five years old, without including required disclosures (e.g., the dates of the ratings and/or the periods of time upon which the ratings were based). The alleged violations were mostly found on the RIAs’ public websites and, to a lesser extent, public websites of third parties, social media sites, online videos, and even a jumbotron and physical objects, such as bags and flags.
Without admitting or denying the findings, each RIA consented to the entry of orders finding that each violated the Advisers Act and ordering each to be censured, cease-and-desist from violating the applicable provisions of the Marketing Rule, comply with certain undertakings, and pay civil monetary penalties ranging from $60,000 to $325,000, for a combined penalty of over $1.2 million.
Litigation Rel. No. 2024-121, SEC Charges Nine Investment Advisers in Ongoing Sweep into Marketing Rule Violations, (Sept. 9, 2024), available at: https://www.sec.gov/newsroom/press-releases/2024-121.