SEC Settles Enforcement Proceedings Against Nine Advisers for Alleged Marketing Rule Violations
On September 9, 2024, the SEC announced the settlement of administrative proceedings brought against nine registered investment advisers for various alleged violations of Rule 206(4)-1 under the Investment Advisers Act of 1940, also known as the Marketing Rule, including the dissemination of advertisements containing untrue or unsubstantiated statements of material fact or testimonials, endorsements or third-party ratings that lacked required disclosures.
The SEC alleged that two of the advisers disseminated advertisements on their websites which contained untrue statements of material fact, one relating to third-party ratings that were misstated and the other relating to the adviser’s purported membership in a non-existent organization.
The SEC alleged that four of the advisers disseminated advertisements on their websites which contained unsubstantiated statements of material fact claiming that the adviser or its representative provided investment advice without conflicts of interest, statements that were at odds with disclosures in the adviser’s Form ADV brochure.
The SEC alleged that five of the advisers advertised testimonials, endorsements or third-party ratings that lacked required disclosures. These included: (1) endorsements that did not disclose that the endorsement was given by a person that was not a current client, that cash compensation was provided for the endorsement, or any material conflicts of interest resulting from the compensation arrangement; (2) third-party ratings that did not disclose the date on which the rating was given or the period of time upon which the rating was based; and (3) purported testimonials that were not from current clients.
Without admitting or denying the allegations, each of the nine advisers agreed to cease and desist from future violations, to be censured, to comply with certain undertakings and to pay civil monetary penalties, which totaled $1,240,000 in aggregate, with penalties ranging from $60,000 to $325,000. These settlements highlight the SEC’s continued focus on Marketing Rule violations, having reached similar settlements for alleged Marketing Rule violations in September 2023, April 2024, June 2024 and August 2024.
The SEC’s press release is available here.
Vedder Thinking | Articles SEC Settles Enforcement Proceedings Against Nine Advisers for Alleged Marketing Rule Violations
Newsletter/Bulletin
October 10, 2024
On September 9, 2024, the SEC announced the settlement of administrative proceedings brought against nine registered investment advisers for various alleged violations of Rule 206(4)-1 under the Investment Advisers Act of 1940, also known as the Marketing Rule, including the dissemination of advertisements containing untrue or unsubstantiated statements of material fact or testimonials, endorsements or third-party ratings that lacked required disclosures.
The SEC alleged that two of the advisers disseminated advertisements on their websites which contained untrue statements of material fact, one relating to third-party ratings that were misstated and the other relating to the adviser’s purported membership in a non-existent organization.
The SEC alleged that four of the advisers disseminated advertisements on their websites which contained unsubstantiated statements of material fact claiming that the adviser or its representative provided investment advice without conflicts of interest, statements that were at odds with disclosures in the adviser’s Form ADV brochure.
The SEC alleged that five of the advisers advertised testimonials, endorsements or third-party ratings that lacked required disclosures. These included: (1) endorsements that did not disclose that the endorsement was given by a person that was not a current client, that cash compensation was provided for the endorsement, or any material conflicts of interest resulting from the compensation arrangement; (2) third-party ratings that did not disclose the date on which the rating was given or the period of time upon which the rating was based; and (3) purported testimonials that were not from current clients.
Without admitting or denying the allegations, each of the nine advisers agreed to cease and desist from future violations, to be censured, to comply with certain undertakings and to pay civil monetary penalties, which totaled $1,240,000 in aggregate, with penalties ranging from $60,000 to $325,000. These settlements highlight the SEC’s continued focus on Marketing Rule violations, having reached similar settlements for alleged Marketing Rule violations in September 2023, April 2024, June 2024 and August 2024.
The SEC’s press release is available here.
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