In January, the SEC charged a NY-based money manager and his firm for making false and misleading claims about the success of the funds they manage through social media outlets, widely disseminated newsletters, and other communications. The SEC Order (the Order) against Mark A. Grimaldi (Grimaldi) and Navigator Money Management (NMM) found that Grimaldi and NMM were selective in advertising the past performance of various funds and specific securities recommendations they made to clients. Specifically, the Order claimed that they cherry-picked the highlights of their successes, but ignored less successful recommendations and fund performance.
According to the Order, Grimaldi (the majority owner, president and chief compliance officer of NMM) used certain newsletters to solicit investors, and such newsletters were deemed to be “advertisements” by the SEC. In its examination, the SEC found that the newsletters contained several misleading claims about the funds NMM managed, its performance and rankings within the industry. The Order also charged Grimaldi with making statements on Twitter, with respect to the level of his involvement in a highly successful portfolio.
The Order found that Grimaldi and NMM violated various sections of the Securities Act, the Advisers Act and the Investment Company Act. Grimaldi and NMM both agreed to settle the charges with the SEC. Grimaldi agreed to pay a penalty of $100,000, and he and NMM agreed to be censured and comply with certain requirements imposed by the SEC, including the retention of an independent compliance consultant for three years. Without admitting or denying the SEC’s finding, Grimaldi and NMM were also required to cease from any future violations that they were charged with in the order.
In connection with the investigation, SEC staff members emphasized the requirement that investment advisers be honest and provide a full picture of their investment recommendations in their advertising in order to give investors the full picture prior to making an investment.
Advisers are cautioned to carefully review all advertising materials to ensure they are not “cherry-picking” investment highlights and instead provide an accurate and fulsome picture for prospective investors.