The Securities and Exchange Commission (SEC) has settled charges against nine registered investment advisers for violating the Marketing Rule.
According to the SEC, the firms disseminated misleading advertisements containing untrue or unsubstantiated claims, testimonials, endorsements, or third-party ratings that lacked proper disclosures. The firms have agreed to pay a combined total of $1.24 million in civil penalties.
Firms Fined
The SEC’s action targeted the following firms and imposed corresponding penalties:
Abacus Planning Group Inc. – $150,000
AZ Apice Capital Management LLC – $70,000
Beta Wealth Group, Inc. – $80,000
Droms Strauss Advisors Inc. – $85,000
Howard Bailey Securities LLC – $90,000
Integrated Advisors Network LLC – $325,000
Professional Financial Strategies Inc. – $60,000
Richard Bernstein Advisors LLC – $295,000
TS Bank d/b/a Callahan Financial Planning – $85,000
In the Marketing Rule violations the SEC announced September 9, the agency alleged the firms made misleading claims or failed to substantiate the information presented in their advertisements.
The nature of some of the charges shows the clarity the SEC is expecting from advisors when they advertise recognition or awards on their website. For example, in the case of Richard Bernstein, its website stated the firm’s chief investment officer and head of its investment committee, who is also a principal, was named one of Fortune Magazine’s “All-Star Analysts” and one of Smart Money Magazine’s “Power 30” without disclosing the date of the ratings, the SEC said. The “All-Star Analyst” rating was from 2001 and 2002, and the “Power 30” rating was from 2002 and 2004, it added.
in the case of Abacus, the SEC cited the RIA for advertising it was named a “Top 12 Financial Advisor” by Barron’s when Abacus was rated a “Top 1200 Financial Advisor.” The SEC also said Abacus identified itself based on a third-party rating as a “Top 100 Women’s Advisor” rather than correctly identifying the rating as “Top 100 Women Financial Advisors.” The SEC also said in some cases Abacus did not disseminate the date of a rating.
Other violations involved unsubstantiated claims of conflict-free advisory services by AZ Apice, Droms Strauss, Callahan Financial, and Integrated Advisors Network.
For example, Integrated Advisor Network was cited for advertising it provides investment advice that puts the client first by “aligning incentives and eliminating conflicts of interest.” The SEC said the RIA did not provide any context for the claim. “Integrated Advisors recognizes various conflicts of interest inherent in the role as an investment adviser, including conflicts of interest disclosed in its Form ADV Part 2A brochures,” the SEC said.
SEC’s Stance on the Violations
Corey Schuster, co-chief of the SEC’s Asset Management Unit, emphasized the importance of the Marketing Rule in safeguarding investors. “The Marketing Rule’s provisions regarding truthfulness, substantiation, and disclosure are critical to protecting investors. The advertisements at issue violated the Marketing Rule and posed a serious risk of misleading investors,” Schuster said. He further emphasized the SEC’s commitment to holding investment advisers accountable when they fail to comply.
Settlement and Enforcement Actions
The nine firms consented to the entry of orders without admitting or denying the SEC’s findings. The orders included censure, cease-and-desist provisions, compliance with specific undertakings, and civil penalties.
The SEC’s ongoing investigation into potential Marketing Rule violations continues, led by a team from the Asset Management Unit and other SEC divisions.
The enforcement action is a strong reminder to investment advisers of the need to adhere strictly to the Marketing Rule to protect investor interests and ensure transparency in financial marketing practices.
