SEC's marketing rule sweep hits 9 firms with $1.2M in fines

The SEC is imposing more than a million dollars in civil penalties on nine registered investment advisors for alleged violations of its marketing rule.

The fines are falling on some well-known names in the RIA industry, including Abacus Planning Group, Beta Wealth Group, Integrated Advisors Network, Richard Bernstein Advisors and Callahan Financial Planning. All told, the firms agreed to pay $1.24 million to resolve allegations that they had violated the Security and Exchange Commission's prohibition on making unsubstantiated claims in marketing materials or using outside testimonials and endorsements without making proper disclosures.

The SEC, for instance, alleged that Abacus and Callahan Financial ran ads containing untrue statements about ratings from third-party groups. Callahan, a subsidiary of TD Bank, was also accused of posting an ad that falsely claimed that it was a member of an in-fact nonexistent organization.

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Beta Wealth, according to the settlement, "disseminated advertisements that it could not substantiate regarding an award provided to a firm principal." And another of the named RIAs, Howard Bailey, published ads featuring testimonials from two supposedly current clients who were in fact not with the firm, according to the SEC. It also, the SEC said, published endorsements without revealing that the endorser was not a client and had been paid to offer up praise.

"The advertisements at issue in each of these actions violated the Marketing Rule and posed a serious risk of misleading investors," said Corey Schuster, the co-chief of the SEC division of enforcement's asset management unit. The firms in the dispute neither admitted nor denied the charges. 

The SEC's marketing rule took effect in November 2022. It applies to communications that advisors send to two or more current or prospective clients and generally calls on them to make sure any investment-related statements they make in marketing materials can be supported by independent facts. It also allows advisors to begin using outside endorsements and client testimonials in advertisements, but only if they make sure to disclose who the third parties are and say if they are offering pay for their praise.

This isn't the first time the SEC has rebuked firms for allegedly running afoul of its marketing prohibitions. In September 2023, it hit nine other RIAs with $800,000 in fines for similar alleged violations.

The firms in the settlement announced Monday, and the amounts they are paying, were:

• Abacus Planning Group, $150,000
• AZ Apice Capital Management, $70,000
• Beta Wealth Group, $80,000
• Droms Strauss Advisors, $85,000
• Howard Bailey Securities, $90,000
• Integrated Advisors Network, $325,000
• Professional Financial Strategies, $60,000
• Richard Bernstein Advisors, $295,000
• Callahan Financial Planning, $85,000