SEC fines 9 more investment advisors $1.2M, in ongoing marketing rule crackdown

A week after the Securities and Exchange Commission accused Black Dragon Investment Management with failing to register as investment advisors and with violating the SEC’s marketing rule by posting misleading performance data, the agency announced charges against nine registered investment advisors for violating the Marketing Rule by disseminating unsubstantiated advertisement, totaling $1,240,000.

The Marketing Rule went into effect in November 2022 and was broadened by the SEC in June 2023.

The SEC claimed the advertisements of the nine firms included untrue or unsubstantiated statements or testimonials, endorsements, or third-party ratings that lacked required disclosures. All nine of the following firms have agreed to settle the SEC’s charges and to pay civil penalties:

• Abacus Planning Group: $150,000 for publishing ads with untrue statement about 3^rd party rating and for including in their advertisements third-party ratings, some of which were more than five years old, without disclosing the dates on which the ratings were given or the periods of time upon which the ratings were based
• AZ Apice Capital Management: $70,000 for disseminating ads that claimed to provide conflict-free advisory services, which it was not able to substantiate
• Beta Wealth Group: $80,000 for disseminating ads that it could not substantiate regarding an award provided to a firm principal and for including in their advertisements third-party ratings, some of which were more than five years old, without disclosing the dates on which the ratings were given or the periods of time upon which the ratings were based
• Droms Strauss Advisors: $85,000 for disseminating ads that claimed to provide conflict-free advisory services, which it was not able to substantiate
• Howard Bailey Securities: $90,000 for disseminating ads claiming to contain two testimonials, but neither actually came from current clients and for advertised endorsements that did not disclose that the endorser was a paid, non-client of Howard Bailey in videos, on social media, and on physical objects such as bags and flags
• Integrated Advisors Network: $325,000 for disseminating ads that claimed to provide conflict-free advisory services, which it was not able to substantiate
• Professional Financial Strategies: $60,000 for including in their advertisements third-party ratings, some of which were more than five years old, without disclosing the dates on which the ratings were given or the periods of time upon which the ratings were based
• Richard Bernstein Advisors: $295,000 for including in their advertisements third-party ratings, some of which were more than five years old, without disclosing the dates on which the ratings were given or the periods of time upon which the ratings were based
• Callahan Financial Planning: $85,000 for publishing ads with untrue statement about 3^rd party rating, posting an ad falsely claiming it was a member of an organization that did not exist and for disseminating ads that claimed to provide conflict-free advisory services, which it was not able to substantiate

“The Marketing Rule’s provisions regarding truthfulness, substantiation, and disclosure are critical to protecting investors,” said Corey Schuster, Co-Chief of the SEC Division of Enforcement’s Asset Management Unit. “The advertisements at issue in each of these actions violated the Marketing Rule and posed a serious risk of misleading investors. Investment advisers must comply with all aspects of the Marketing Rule, and we will continue to hold them accountable when they fail to do so.”

For example, in the case of Richard Bernstein, its website stated the firm’s chief investment officer and head of its investment committee, who is also a principal, was named one of Fortune Magazine’s “All-Star Analysts” and one of Smart Money Magazine’s “Power 30” without disclosing the date of the ratings. In the case of Abacus, the SEC cited the RIA for advertising it was named a “Top 12 Financial Advisor” by Barron’s when Abacus was rated a “Top 1200 Financial Advisor.”

Without admitting or denying the SEC’s findings, all of the firms consented to the violations of the Investment Advisers Act of 1940 and ordered them to be censured, to cease and desist from violating the charged provisions, to comply with certain undertakings, and to pay the civil penalties referenced above.

Related: Ameriprise & other investment firms fined $393M by SEC for misuse of texting apps

Last month, the SEC fined 26 firms nearly $400 million for not preserving electronic communications. In April, the SEC also announced settled charges against five registered investment advisers for Marketing Rule violations. Those firms – GeaSphere, Bradesco Global Advisors, Credicorp Capital Advisors, InSight Securities and Monex Asset Management – also agreed to settle the SEC’s charges and to pay $200,000 in combined penalties.