SEC Fines 9 RIA Firms for Violating Marketing Rule
The Securities and Exchange Commission (SEC) announced the settlement of charges against nine registered investment advisors for violating the Marketing Rule by disseminating advertisements containing untrue or unsubstantiated statements of material fact, as well as testimonials, endorsements, or third-party ratings that lacked required disclosure.
All nine firms have agreed to settle the charges and pay $1.2 million in combined civil penalties.
The nine firms and their penalties are: 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); and TS Bank d/b/a Callahan Financial Planning ($85,000).
Abacus and Callahan Financial “published advertisements with untrue statements about third-party ratings” and “Callahan Financial posted an advertisement falsely claiming that it was a member of an organization that did not exist,” according to the SEC.
AZ Apice, Callahan Financial, Droms Strauss, and Integrated Advisors “disseminated advertisements that claimed to provide conflict-free advisory services, which the firms were not able to substantiate,” the SEC said.
In addition, Beta Wealth disseminated advertisements “that it could not substantiate regarding an award provided to a firm principal” and “Howard Bailey disseminated advertisements claiming to contain two testimonials, but neither actually came from current clients,” according to the SEC orders. Howard Bailey also advertised endorsements “that did not disclose that the endorser was a paid, non-client of Howard Bailey in videos, on social media, and on physical objects such as bags and flags.”
Abacus, Beta Wealth, Professional Financial, and Richard Bernstein Advisors advertised third-party ratings, some of which were more than five years old, but did not disclose the dates or time periods on which the ratings were based, the SEC order stated.
“The Marketing Rule’s provisions regarding truthfulness, substantiation, and disclosure are critical to protecting investors. The advertisements at issue in each of these actions violated the Marketing Rule and posed a serious risk of misleading investors,” said Corey Schuster, Co-Chief of the SEC Division of Enforcement’s Asset Management Unit.
Without admitting or denying the SEC’s findings, all the firms consented that they violated the Investment Advisers Act of 1940. The regulator ordered them to be censured, cease and desist from violating the charged provisions, comply with certain undertakings, and pay the civil penalties.
