The Office of Compliance Inspections and Examinations (OCIE) of the SEC issued a Risk Alert yesterday providing a list of the most frequently identified compliance issues relating to the Advertising Rule (Rule 206(4)-1) under the Investment Advisers Act of 1940. These compliance issues were identified as part of the OCIE examination of investment advisers: misleading performance results, misleading one-on-one presentations, misleading claim of compliance with voluntary performance standards, “cherry-picked” profitable stock selections, misleading selection of recommendations and insufficient/inaccurate compliance policies and procedures.
Compliance with the Advertising Rule has long been, and remains, a favorite focus of the SEC. In an age of fundraising challenges, investment advisers must balance the pressing need of appealing to prospective clients with adherence to precise regulatory standards. Each marketing piece should go through rigorous internal review and sign-off procedures and, as necessary, outside counsel evaluation. Investment advisers are urged to pay special attention to any form of performance or track record marketing.
Click here for the full Risk Alert.