The Securities and Exchange Commission (SEC) recently made a sweeping move in law enforcement by announcing charges against nine registered investment advisers. The advisers, going forward referred to as the “Advisers,” have been accused of violating marketing rules by advertising hypothetical performance to the general public on their respected websites. This form of advertising was done without the necessary adoption and implementation of policies and procedures required by Rule 206(4)-1, or the “Marketing Rule”, under the Investment Advisers Act of 1940, also known as the “Advisers Act”. This information was obtained from a recent legal update by Seward & Kissel LLP on JD Supra.
The SEC’s enforcement sweep resulted in significant financial penalties for the Advisers. Collectively, the parties have agreed to pay $850,000 in combined penalties to settle the SEC’s charges. Whilst the enforcing party has agreed to these terms, the SEC’s examination findings and imposed sanctions highlight the increasing scrutiny of regulatory compliance within the investment advising sector.
Compliance with the Marketing Rule is likely to remain at the forefront of issues for investment advisers, as the SEC continues to crack down on regulatory compliance. This event emphasizes the necessity for all regulated entities to regularly review and rigorously enforce compliance protocols to assure adherence to all federal regulations including the Advisers Act and the appended Marketing Rule.
This change in the legal landscape requires future-forward thinking from businesses within this sphere. To ensure higher compliance and prevent incurring future legal difficulties, firms might benefit from continuously reviewing and updating their existing compliance policies and procedures. This would not only provide better transparency to clients but also help in resisting regulatory stress in the current dynamically shifting legal environment.