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SEC Brings Second Set of Marketing Rule Violation Cases
Background:
- On September 9, 2024, the U.S. Securities and Exchange Commission (“SEC”) brought a package of nine Enforcement1 cases focused on violations of the Marketing Rule, including requirements around substantiating material facts and the use of testimonials, endorsement, and third-party ratings.
- All respondents were wealth managers who published advertisements on their websites.
- The firms agreed to pay civil penalties ranging from $60,000 to $325,000.
Key Takeaways:
- Continued Focus on Substantiation –The SEC initially highlighted this focus area in a Risk Alert relating to marketing rule observations issued on April 17, 2024. Substantiation continues to pose significant risk and other areas highlighted by the risk alert including awards and statements relating to the investment process are likely to be continued focus areas.
- Avoid Hyperbole – Statements about being free from conflicts of interest, being a fiduciary and receiving certain awards may seem like embellishment, but they are taken at face value by the SEC. Advisers should be careful.
- The Sweep is Ongoing – These cases are a result of a Marketing Rule sweep which the SEC says is still ongoing.
Violations:
1 In the Matters of: Abacus Planning Group Inc., AZ Apice Capital Management LLC, Beta Wealth Group, Inc., Droms Strauss Advisors Inc., Howard Bailey Securities LLC, Integrated Advisors Network LLC, Professional Financial Strategies Inc., Richard Bernstein Advisors LLC, TS Bank d/b/a Callahan Financial Planning