SEC Enforcement on Marketing Rule Violations: RIAs to Pay $1.2M in Fines
The SEC continues to flex its regulatory muscle over Registered Investment Advisors (RIAs) in its latest enforcement action targeting violations of the 2021 marketing rule. Nine RIAs have agreed to pay more than $1.2 million in collective fines for misleading advertising practices. The firms include prominent names like Integrated Advisors Network, Richard Bernstein Advisors, and Abacus Planning Group, each paying six-figure fines to settle charges brought by the commission.
The Nature of the Violations
The SEC’s marketing rule, which took effect in 2021, governs how RIAs can use testimonials, endorsements, and performance metrics in advertising. This rule has been a particular area of focus for the commission, as it seeks to protect investors from misleading claims.
Corey Schuster, co-chief of the SEC’s Asset Management Unit, emphasized that these violations pose "a serious risk" of misleading investors. He reiterated the SEC's commitment to enforcing all aspects of the marketing rule. "Investment advisors must comply with all aspects of the marketing rule, and we will continue to hold them accountable when they fail to do so," Schuster said.
The fines levied against these firms reflect the SEC's continued push to ensure compliance in the advertising practices of investment advisors. Integrated Advisors Network was fined $325,000 for promoting ads that suggested it could "align incentives and eliminate conflicts of interest" without adequately supporting this claim. Richard Bernstein Advisors and Abacus Planning Group faced penalties of $295,000 and $150,000, respectively, for similar violations.
Misleading Claims and Inadequate Disclosures
The SEC's findings were not limited to general advertising practices. Several firms were charged with more specific violations. Callahan Financial, for example, was found to have falsely claimed affiliation with a non-existent organization. Howard Bailey was flagged for using paid endorsements from non-clients, failing to disclose the nature of these testimonials.
One recurring issue in these cases was the improper use of third-party ratings. Richard Bernstein Advisors, Abacus Planning Group, and several other firms used ratings that were outdated by over five years, without disclosing the dates of the ratings—violations of the marketing rule's stringent requirements.
The SEC’s Focus on Hypothetical Performance Metrics
The SEC’s scrutiny over advertising practices isn’t new. In late 2022, the commission began to focus on firms making claims related to hypothetical performance metrics. In August 2023, the SEC charged Titan Global Capital Management with misleading investors by publishing performance data tied to its crypto strategy, which later proved inaccurate. Since then, the SEC has resolved several enforcement actions related to the marketing rule.
Notably, the Pacific Financial Group, a Washington-based RIA managing over $3.7 billion in assets, agreed to pay $430,000 last month to settle charges related to the improper use of hypothetical performance metrics in its advertising materials.
Takeaways for RIAs: Heightened Compliance Obligations
These enforcement actions serve as a critical reminder that RIAs must exercise caution in their advertising practices, particularly when making bold claims about their services. The SEC has now issued three risk alerts related to the marketing rule, and firms continue to fall short of compliance. One key issue involves RIAs claiming to offer conflict-free advice. As Wealthtender CEO Brian Thorp pointed out, such claims are often unsustainable in practice. He notes that most firms, by the nature of their fee structures, face inherent conflicts of interest.
"For example, most advisory firms earn additional revenue as the assets they manage increase, so a conversation about rolling a 401(k) over to the firm to manage in an IRA represents an example of conflicted advice," Thorp said. "An advertisement suggesting a firm offers conflict-free advice should probably never see the light of day."
The SEC’s crackdown on marketing rule violations is a clear signal to RIAs: compliance must be comprehensive, and misleading advertising will not be tolerated. As the commission continues to refine its enforcement efforts, firms should closely review their advertising materials to ensure alignment with the rule’s requirements. Failure to do so may lead to costly penalties and reputational damage.
For firms looking to avoid the regulatory crosshairs, proactive compliance measures—such as robust disclosures, careful vetting of marketing claims, and transparent performance metrics—will be critical moving forward.
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