In another warning that it is past time to start complying with the revised marketing rules, the Securities and Exchange Commission (SEC) has settled charges against five registered investment advisers for what they considered to be misleading advertising.
According to an April 12 announcement, all five companies (listed below) have agreed to resolve the SEC's charges and pay a combined fine of $200,000.
- Geosphere LLC
- Bradesco Global Advisors, Inc.
- Creditcorp Capital Advisors LLC
- Insight Securities Co., Ltd.
- Monex Asset Management Co., Ltd.
The SEC's order states that the five companies have adopted “reasonably designed” policies and procedures to ensure that hypothetical performance is related to the expected financial situation and investment objectives of each advertisement's intended audience. and was found to have advertised hypothetical achievements on its website to the general public without actually implementing them. , as required by the Marketing Rules.
The SEC notes that Bradesco, Creditcorp, Insight, and Monex took corrective actions before being contacted by Commission staff, which resulted in reduced penalties.
According to the order, GeaSphere made false and misleading representations in its advertisements, promoted misleading model performance, failed to demonstrate the performance shown in its advertisements, and compensated for its endorsement. It said it also violated other regulatory requirements, including not entering into written contracts with people. .
The order further states that GeaSphere committed clear recordkeeping and compliance violations and made misleading statements about its performance to registered investment company customers, and that the misleading statements were submitted to the Commission. It was revealed that it was included in the customer's prospectus.
“The provisions of the Marketing Rule are critical to protecting investors from misleading advertising claims,” Corey Schuster, co-director of the SEC's Enforcement Division's Asset Management Division, said in a statement. “Today’s actions demonstrate that we will continue to take targeted efforts to ensure that investment advisers fully comply with their obligations under the Regulation. It also serves as a reminder of the benefits for businesses that take corrective action before being contacted by Council staff.”
Without admitting or denying the SEC's findings, all companies were found to be in violation of the Investment Advisers Act of 1940, censured, and required to cease violating the incriminating provisions and comply with certain commitments. I consented to the entry of an order directing me to do so.
GeaSphere agreed to pay a civil penalty of $100,000. Bradesco, Credicorp, InSight and Monex agreed to pay civil penalties ranging from $20,000 to $30,000. This reflects certain corrective actions taken by each of these companies prior to being contacted by Commission staff.
Thorough compliance
This is the second set of cases brought by the European Commission as part of an ongoing targeted sweep into violations of marketing regulations, following the indictment of nine advisory firms in September 2023. Similar to today's announcement, the SEC found that each of the accused companies touted fictitious financial results. You end up with a large audience viewing your website without having the necessary policies and procedures in place. The companies settled and paid civil penalties totaling $850,000.
Similarly, fintech investment advisor Titan Global Capital Management USA LLC in August awarded more than $1 million in civil penalties, disgorgement, and prejudgment interest to resolve charges of violating marketing regulations. agreed to pay.
In December 2020, the SEC voted to modernize the rules governing investment adviser advertising and attorney fees under the Investment Advisers Act. To give advisers a transition period, adviser firms had until November 2022 to fully comply with the rules.
