SEC Fines Nine Firms for Marketing Rule Violations
The Securities and Exchange Commission has fined nine more registered investment advisory firms over alleged violations of the recently amended marketing rule.
In a sweep, the SEC ordered the firms to pay $850,000 in penalties, with each paying $50,000 to $175,000.
According to the regulator, the firms failed to adopt or implement policies and procedures designed to ensure that the hypothetical performance they present to advertise to the public on their websites “is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement,” according to an SEC statement.
The firms agreed to be censured, to cease and desist from violating the charged provisions and to comply with undertakings not to advertise hypothetical performance without having the requisite policies and procedures.
“Because of their attention-grabbing power, hypothetical performance advertisements may present an elevated risk for prospective investors whose likely financial situation and investment objectives don’t match the advertised investment strategy,” Gurbir S. Grewal, director of the agency’s division of enforcement.
The firms charged include: Banorte Asset Management Inc., BTS Asset Management Inc., Elm Partners Management LLC, Hansen & Associates Financial Group Inc, Linden Thomas Advisory Services LLC, Macroclimate LLC, McElhenny Sheffield Capital Management LLC, MRA Advisory Group and Trowbridge Capital Partners LLC.
Macroclimate and MRA also violated the marketing rule by failing to maintain copies of their advertisements.
The new marketing rule, which went into effect in November 2022, revised a decades-old policy by eliminating limitations on testimonials and endorsements but still placing restrictions on touting performance and other variables.
Last month, the SEC announced a fine of more than $1 million to fintech investment advisory firm Titan Global Capital Management USA LLC in connection with violations related to misleading advertisements and other compliance failures.