The Securities and Exchange Commission (SEC) has cracked down on five registered investment advisers.
The SEC imposed fines on five entities for violating marketing rules in what would be the second wave of regulatory action in the space of a year.
SEC fines investment advisors
All five firms have held their hands up and agreed to settle the penalties levied on them by the government body. The combined fines come in at $200,000 and the SEC has also imposed other charges.
The SEC’s investigations and orders found that “the five firms advertised hypothetical performance to the general public on their websites without adopting and implementing policies and procedures reasonably designed to ensure that the hypothetical performance was relevant to the likely financial situation and investment objectives of each advertisement’s intended audience, as required by the Marketing Rule.”
The five firms charged are:
- GeaSphere LLC
- Bradesco Global Advisors Inc.
- Credicorp Capital Advisors LLC
- InSight Securities Inc.
- Monex Asset Management Inc.
Co-Chief of the SEC Enforcement Division’s Asset Management Unit. Corey Schuster would comment on the charges and the importance of the rules in place to safeguard consumers. He 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.”
This is the second wave of marketing rule breaches that have been investigated by the SEC. The first wave was brought to light and nine advisory firms were hit with regulatory scrutiny in September 2023.
The order result would say “GeaSphere agreed to pay a civil penalty of $100,000. Bradesco, Credicorp, InSight, and Monex agreed to pay civil penalties ranging from $20,000 to $30,000, which reflected certain corrective steps taken by each of these firms before being contacted by the Commission staff.”
GeaSphere was hit with the heaviest penalties as they were found to have misled the orders of the SEC. The company made false statements in advertisements and could not make good on its commitments to consumers.
GeaSphere also violated other regulatory requirements, including by making false and misleading statements in advertisements, advertising misleading model performance, being unable to substantiate performance shown in its advertisements, and failing to enter into written agreements with people it compensated for endorsements.
The order further finds that GeaSphere committed recordkeeping and compliance violations and made misleading statements about its performance to a registered investment company client “that the misleading statements were included in the client’s prospectus filed with the Commission.”
Image: Ideogram.
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