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Advertising Issues for RIAs

advertising issues for rias

The Office of Compliance Inspections and Examinations (“OCIE”) has provided a list of RIA-related advertising issues that are most frequently identified in deficiency letters. The Advertising Rule prohibits an adviser, directly or indirectly, from publishing, circulating, or distributing any advertisement that contains any untrue statement of material fact or that is otherwise false or misleading (Advisers Act Rule 206(4)-1(a)(5)). The Advertising Rule also includes four specific prohibitions:

1. Prohibition on advertisements that refer, directly or indirectly, to any testimonial concerning the adviser or any advice, analysis, report or other service rendered by the adviser;
2. Prohibition on advertising past specific recommendations of the adviser that were or would have been profitable to any person;
3. Prohibition on advertisements claiming that any graph, chart, formula, or other device can by itself determine whether to buy or sell a security); and
4. Prohibition on advertisements that offer purportedly free reports, analyses, or services.

Most Frequent Advertising Rule Compliance Issues

Misleading Performance Results

OCIE staff has observed advisers who presented performance results without deducting advisory fees. Staff also observed adviser advertisements that compared results to a benchmark but did not include disclosures about the limitations inherent in 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. Additionally, staff observed adviser advertisements that contained hypothetical and back-tested performance results but did not explain how these returns were derived or include other potentially material information regarding the performance results.

Misleading One-on-One Presentations

OCIE staff has observed advertisements that they believe contain misleading one-on-one presentations. For example, staff observed advisers that advertised performance results (gross of fees) in certain one-on-one presentations but did not include potentially relevant disclosures. In addition, some one-on-one presentations (that are subject to the Advertising Rule) did not disclose that the advertised performance results did not reflect the deduction of advisory fees, and such fees and other expenses would reduce that client’s returns.

Misleading Claim of Compliance with Voluntary Performance Standards

OCIE staff has observed advertisements that they believe contain misleading claims of compliance with voluntary performance standards. For example, staff observed advisers who claimed that their advertised performance results complied with a certain voluntary performance standard when it was not clear to staff that the performance results, in fact, adhered to the performance standard’s guidelines.

Cherry-Picked Profitable Stock Selections

OCIE staff has observed advertisements that they believe contain cherry-picked stock selections. For example, staff observed advisers that included only profitable stock selections or recommendations in presentations, client newsletters, or on their websites without meeting the conditions set forth in Subsection (a)(2) of the Advertising Rule.

Misleading Selection of Recommendations

OCIE staff has observed advertisements that they believe contain misleading selections of investment recommendations. For example, staff observed advisers that disclosed past specific investment recommendations that may have been misleading because they included only certain, and not all, recommendations to illustrate a particular investment strategy, and they did not meet the conditions set forth in Subsection (a)(2) of the Advertising Rule. In addition, they did not satisfy the representations upon which IM staff based certain no-action assurances.

Compliance Policies and Procedures

OCIE staff observed advisers who did not appear to have compliance policies and procedures reasonably designed to prevent deficient advertising practices. For example, the staff observed advisers that did not have or did not implement policies and procedures pertaining to the following issues: the process for reviewing and approving advertising materials before their publication or dissemination; when using composites, determining the parameters for which accounts were included or excluded from performance calculations, and confirming the accuracy of performance results in compliance with the Advertising Rule.

Misleading Use of Third-Party Rankings or Awards

OCIE staff observed advertisements containing the potentially misleading use of third-party rankings or awards. Staff observed advisers that published potentially misleading advertisements containing references to awards or rankings conferred by third parties that failed to disclose facts, which staff believes were material under the circumstances, about such awards or rankings. For example:

• Advisers advertised accolades that had been obtained by submitting potentially false or misleading information in the applications for such accolades.
• Advisers published marketing materials referencing stale ranking or evaluation information, thus potentially misrepresenting the adviser’s current status. For example, OCIE staff observed advertisements that referred to advisers receiving high rankings in various publications, but those publications were issued several years prior, and the rankings were no longer applicable.
• Advisers published potentially misleading advertisements that did not disclose the relevant selection criteria for the awards or rankings, who created and conducted the survey, and the fact that advisers paid a fee to participate in or distribute the survey results.

Misleading Use of Professional Designations

OCIE staff observed advertisements and disclosures made in advisers’ Form ADV Part 2B Brochure Supplements that contained potentially false or misleading references to employee professional designations, such as, for example, references to professional designations that have lapsed or that did not explain the minimum qualifications required to attain such designations.


OCIE staff observed advisers that had published statements of clients attesting to their services or otherwise endorsing the adviser that may be prohibited testimonials (e.g., client endorsements published in firm websites, social media pages, reprints of third-party articles, or pitch books).

Worried About Your Marketing?

If you have questions about your disclosures, marketing materials, or how your firm complies with the Advertising Rule, contact us today.

Author Bio

Leila Shaver is the Founder of My RIA Lawyer, a law firm that provides compliance and legal consulting for financial institutions. With extensive experience as a securities attorney and compliance expert, she has served as Chief Compliance Officer and General Counsel to RIAs, BDs, and TAMPs with billions in assets under management.

Leila understands the challenges RIAs face and is committed to helping RIAs streamline their processes, mitigate risks, and ensure compliance with regulatory requirements. She received her Juris Doctor from Atlanta’s John Marshall Law School and is a West Georgia Young Lawyers’ Association member. Leila has received numerous accolades for her work, including the Carroll County Bar Association’s Outstanding Young Lawyer Award in 2017.

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