Category: Alerts

SEC Enforcement Action for Violation of the Advertising Rule Performance Results

Private Fund Advisor to Pay $1 million for Advertising and Compliance Failures.

On April 17, the SEC announced the outcome of an Administrative Proceeding against a Private Fund Adviser, a registered investment adviser based in Boston, Massachusetts. The Advisor has agreed to pay $1 million to settle changes for violations of Section 206 (4) of the Investment Advisors act of 1940 and Rules 206 (4)-1 otherwise known as the Advertising rule and 206 (4)-7, the Compliance Program Rule.

According to the SEC’s Order, while marketing the fund, the Advisor distributed misleading marketing materials relating to its historical performance. Read More

Misleading performance results is one of the most frequent deficiencies sited during examinations of Advertising materials.1

In December, the SEC issued proposed changes to the advertising rule including the guidance on the use of performance results. For a summary of these matters please see the Alaric Alert, Seeking to Modernize – Has the SEC Made Compliance with Rules on Advertising and Cash Solicitation More Complicated?

What Should You Do?

With the impact of COVID-19 on performance, now may be a good time to review your firm’s compliance policies and procedures related to the advertising rule to ensure that they are reasonably designed and followed to prevent deficient advertising practices. CCO’s may need to increase their monitoring of advertising and marketing materials, with a focus on the reporting of performance data.

What Can We Do?

With over 275 years of cumulative financial services compliance expertise, Alaric has managed over 100 regulatory examinations while serving as chief compliance officer. Leveraging this experience, our team of former regulators, lawyers, and in-house chief compliance officers can help your firm keep your compliance program healthy.

Call Alaric today to learn more about our compliance services at 1-888-243-2448 or info@alariccompliance.com or visit our website, at www.alariccompliance.com.

1 https://www.sec.gov/ocie/Article/risk-alert-advertising.pdf

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