SEC Zeroes On RIA Paid Testimonials And Performance Fees As Exams Intensify
The Securities and Exchange Commission is sharpening its focus on how registered examiners continue to see problems – despite years of guidance and enforcement.
The new staff guidance, published January 15, comes on the heels of a December risk alert that detailed recurring deficiencies in advisors’ use of testimonials, endorsements and third-party rankings. Together, the alert and FAQs send a clear message. Marketing rule compliance remains a top priority, and the SEC is still finding basic breakdowns.
“On the heels of its risk alert addressing the testimonials, endorsements, and third-party rankings provisions of the Marketing Rule, the SEC published two FAQs regarding the Marketing Rule,” said Lori Weston, head of compliance at STP Investment Services.
“This [first] FAQ addresses the SEC’s position regarding compensation paid to a person disqualified by a self-regulatory organization when the SRO has not barred or suspended the person… “This [second] FAQ addresses the use of model fees in performance advertising when the actual fees used to calculate the net performance advertised may be lower than fees anticipated to be charged to the intended audience,” Weston said.
As Weston noted, the SEC is no longer just flagging broad concepts. It is drilling down into the details firms often overlook.
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