The SEC staff recently published an alert highlighting the most common deficiencies seen in investment advisers’ marketing materials. Based on its recent examinations and initiatives, the Office of Compliance Inspections and Examinations (OCIE) issued its risk alert to highlight compliance issues relating to Rule 206(4)-1 (the “Advertising Rule”). Here are the top six:
- Misleading Performance Results.
- Misleading One-on-One Presentations.
- Misleading Claim of Compliance with Voluntary Performance Standards.
- Cherry-Picked Profitable Stock Selections.
- Misleading Selection of Investment Recommendations.
- Lack of Adequate Compliance Policies and Procedures.
Earlier this year, we wrote that performance marketing was one of the top 10 regulatory risks for private funds. And after an OCIE risk alert, we often expect to see an uptick in related enforcement activity. At minimum, OCIE is putting the industry on notice that it will scrutinize managers’ advertising and marketing materials.