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SEC fines and censures 5 investment advisers over marketing rule violations

On Behalf of | Apr 23, 2024 | Regulatory Investigations

The Securities and Exchange Commission announced that it has penalized five registered investment advisers for violations of its marketing rule, AdvisorHub reports.

All five firms agreed to settle the SEC’s charges and to pay $200,000 in combined penalties, while also being censured.  The marketing rule, which was updated in 2020 and took effect in 2022, is designed to comprehensively and efficiently regulate advisers’ marketing communications.  It covers marketing activities by investment advisors to clients and prospective investors in private funds that are managed by the advisors.

The five firms charged in the case are: GeaSphere LLC, Bradesco Global Advisors Inc., Credicorp Capital Advisors LLC, InSight Securities Inc. and Monex Asset Management Inc.

According to the SEC’s orders, the firms 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 under the marketing rule.

Bradesco, Credicorp, InSight, and Monex received reduced penalties because of the corrective steps they took before being contacted by the SEC staff.  The SEC said GeaSphere also violated other requirements, including by making false and misleading statements in advertisements, advertising misleading model performance, being unable to substantiate performance shown in its advertisements, and failing to enter into written agreements with people it compensated for endorsements.

“The Marketing Rule’s provisions are crucial to protecting investors from misleading advertising claims,” said Corey Schuster, Co-Chief of the SEC Enforcement Division’s Asset Management Unit. “Today’s actions show that we will continue to employ targeted initiatives to ensure that investment advisers fully comply with their obligations under the rule. They also serve as a reminder of the benefits to firms that take corrective steps before being contacted by Commission staff.”

The five firms did not admit or deny the SEC’s findings, but they all consented to 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, and comply with certain undertakings.

GeaSphere agreed to $100,000 in penalties, while Bradesco, Credicorp, InSight, and Monex each paid between $20,000 to $30,000 as they took “corrective steps” prior to being contacted by the SEC.

The SEC’s previous enforcement actions involving violations of the marketing rule include charges last August against robo-advisor Titan Global Capital Management USA, which agreed to pay over $1 million in fines and disgorgement, and a case the following month in which nine RIAs were censured and ordered to pay $850,000 in combined penalties.

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