SEC Settles Charges Against Nine RIAs for Marketing Rule Violations

The U.S. Securities and Exchange Commission settled charges against nine registered investment advisers for violating the Marketing Rule by disseminating advertisements that included untrue or unsubstantiated statements of material fact or testimonials, endorsements, or third-party ratings that lacked required disclosures. All nine firms agreed to settle the SEC’s charges and pay $1.24 million in combined civil penalties.
The nine firms and their civil 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.
The SEC’s orders found that Abacus and Callahan Financial published advertisements with untrue statements about third-party ratings and that Callahan Financial posted an advertisement falsely claiming that it was a member of an organization that did not exist.
The SEC’s orders found that 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.
According to the SEC’s order, Beta Wealth disseminated advertisements that it could not substantiate regarding an award provided to a firm principal, and Howard Bailey disseminated advertisements containing two testimonials, but neither actually came from current clients. It 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.
Finally, as set forth in the orders, Abacus, Beta Wealth, Professional Financial, and Richard Bernstein Advisors included in their advertisements third-party ratings, some of which were more than 5 years old, without disclosing the dates on which the ratings were given or the periods of time upon which the ratings were based.
“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. “Investment advisers must comply with all aspects of the Marketing Rule, and we will continue to hold them accountable when they fail to do so.”
Without admitting or denying the SEC’s findings, all of the firms consented to the entry of orders finding that they violated the Investment Advisers Act of 1940 and ordering them to be censured, cease and desist from violating the charged provisions, comply with certain undertakings, and pay the civil penalties referenced above.
This was the latest chapter in the Commission’s ongoing sweep into Marketing Rule violations.
As previously reported by The DI Wire, the SEC settled charges in April 2024 against five RIAs that agreed to pay $200,000 in combined penalties. GeaSphere LLC, Bradesco Global Advisors Inc., Credicorp Capital Advisors LLC, InSight Securities Inc., and Monex Asset Management Inc. advertised hypothetical performance to the general public on their websites without adopting and implementing policies and procedures reasonably designed to ensure that the hypothetical performance was relevant to the likely financial situation and investment objectives of each advertisement’s intended audience, as required by the Marketing Rule.
Also, Boston-based Wellesley Asset Management consented to a censure and $1 million fine in fall 2023 due to material misstatements and omissions in marketing materials, directly and indirectly, to certain of its advisory clients and prospective clients.