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9 Firms Charged with Marketing Rule Violations in SEC Sweep

The SEC announced charges against nine RIAs last Monday, as part of its sweep for Marketing Rule compliance. Specifically, the SEC alleged that the firms advertised hypothetical performance without maintaining adequate compliance policies and procedures to ensure that the performance advertising was relevant to the "likely financial situation and investment objectives of the advertisement’s intended audience." Two firms failed to maintain copies of their advertisements. All firms settled with the SEC, for a combined $850,000 in penalties.

The SEC's charges are a reminder that firms should comply closely with the Marketing Rule, including its provisions governing the advertising of gross, portfolio, related, extracted, hypothetical and predecessor performance.

"we will remain vigilant and continue our ongoing sweep to ensure that investment advisers comply with the Marketing Rule, including the requirements for hypothetical performance advertisements.”