On Friday, the Securities and Exchange Commission (SEC) announced it had settled its case against five investment advisers it had charged with violating marketing rules.
All five firms have agreed to settle the SEC’s charges and pay $200,000 in combined penalties. The SEC identified the five firms as GeaSphere LLC; Bradesco Global Advisors Inc.; Credicorp Capital Advisors LLC; InSight Securities Inc.; Monex Asset Management Inc.
According to the SEC, the firms advertised hypothetical performance on their websites without adopting and implementing policies and procedures that would ensure the hypothetical performance was relevant to the likely financial situation and objectives of the advertisement’s intended audience, as required. The agency said Bradesco, Credicorp, InSight, and Monex received reduced penalties because they took corrective steps to fix the issue in advance of being contacted by the SEC’s staff members.
The agency said that GeaSphere also violated other regulatory requirements, including making false and misleading statements in the advertising, advertising misleading model performance, being unable to substantiate the advertised performance, and failing to enter into written agreements with the people it compensated for endorsements. The SEC said GeaSphere also failed to keep adequate records, and made misleading statements about its performance to a registered investment company client, which was included in the client’s prospectus filed with the Commission.
“The Marketing Rule’s provisions are crucial to protecting investors from misleading advertising claims,” Corey Schuster, Co-Chief of the SEC Enforcement Division’s Asset Management Unit, said. “Today’s actions show that we will continue to employ targeted initiatives to ensure that investment advisers fully comply with their obligations under the rule. They also serve as a reminder of the benefits to firms that take corrective steps before being contacted by Commission staff.”
The firms consented to the SEC’s allegations of violating the Investment Advisers Act of 1940 without admitting or denying the findings. The firms were censured, and ordered to cease and desist from the violations. GeaSphere will pay a civil penalty of $100,000, while Bradesco, Credicorp, InSight, and Monex agreed to pay civil penalties ranging from $20,000 to $30,000.