SEC targets disclosure failures tied to paid advisor ratings, awards
The SEC’s latest risk alert emphasizes clearer disclosures when advisors use client testimonials or third-party ratings in marketing. Firms must ensure transparency around payments and prominently display rating dates and periods.
Lori Weston, Head of Compliance, shared her perspective with InvestmentNews:
“A conflict that advisers often fail to fully disclose centers around third party rankings or awards,” Lori Weston, head of compliance at STP Investment Services, told InvestmentNews. “These are not too hard to come by if you’re willing to pay to participate, yet when favorable results are announced and an adviser wishes to tout their ranking, they can be reluctant to provide clear and prominent disclosure indicating that they paid to participate or to be promoted within the survey. Omitting this disclosure is clearly misleading.”
Weston added that, “some violations are likely misunderstandings, though the majority are general failures,” committed by advisory firms. Regarding third-party ratings, the SEC is also clamping down on the need for advisors to “prominently identify the date on which the ratings were given and the period of time upon which the ratings were based,” per the latest risk alert.
Read more on InvestmentNews.
