OCIE Issues Risk Alert on Advertising by Investment Advisers

September 14, 2017

The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued “Risk Alert: The Most Frequent Advertising Rule Compliance Issues Identified in OCIE Examinations of Investment Advisers.” Some of the findings in the Risk Alert include:

• Touting performance in a misleading way;
• Presenting performance results without deducting advisory fees;
• Comparing results to a benchmark but did not include disclosures about the limitations inherent is such comparisons, including instances where, for example, an advertisement did not disclose that the advertised strategy materially differed from the composition of the benchmark to which it was compared;
• Advertising performance results that were "gross of fees" in certain one-on-one presentations;
• Cherry-picking in their advertising and communications, including only profitable stock selections or recommendations in presentations, client newsletters, or on their websites; and
• Disclosing past specific investment recommendations that could have been misleading because they included only certain, and not all, recommendations, in order to illustrate a particular investment strategy.

Click here to access the risk alert.