SEC publishes alert describing most common advertising rule violations

Abstract

Purpose

This paper aims to summarize a new alert issued by the Securities and Exchange Commission’s (SEC’s) Office of Compliance Inspections and Examinations (“OCIE”), highlighting the most common compliance issues relating to Rule 206(4)-1 (the “Advertising Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”).

Design/methodology/approach

This study describes the compliance issues highlighted in the risk alert. OCIE identified these compliance issues as part of its “Touting Initiative,” an examination initiative launched in 2016 to examine the adequacy of disclosures that advisers provided to their clients when touting awards, promoting ranking lists and/or identifying professional designations (collectively, “accolades”) in their marketing materials. The OCIE based its findings on deficiency letters resulting from over 1,000 adviser examinations.

Findings

The risk alert provides guidance to advisers who are reviewing the adequacy and effectiveness of their compliance programs in light of the Advertising Rule.

Originality/value

This study provides practical guidance from experienced investment-fund lawyers. Although most experienced people in the industry will not be shocked by anything in the alert, the alert is a helpful reminder about the SEC’s continuing focus on these issues.

Citation

Clark, T.M. and Biskupska-Haas, A. (2018), "SEC publishes alert describing most common advertising rule violations", Journal of Investment Compliance, Vol. 19 No. 1, pp. 28-30. https://doi.org/10.1108/JOIC-02-2018-0011