SEC warns industry against marketing rule pitfalls

investmentnews.com:

Advisors and firms wrestling with the SEC’s marketing rule now have a little more clarity. The agency has released a summary of findings from examinations related to its marketing rule, revealing both progress and significant missteps by financial advisers in adhering to the guidelines.

The risk alert from the Securities and Exchange Commission’s Division of Examinations shows that while many advisers strive to comply with the rule, several concerning practices persist.

The findings point to numerous instances of noncompliance, ranging from unsubstantiated claims to misleading advertising tactics, raising concerns about the transparency and accuracy of information available to investors.

“Advisers generally included Marketing Rule processes in their compliance policies,” the SEC noted, acknowledging the efforts made by many firms to follow the rule.

However, the division also reported common shortcomings in policies and procedures around marketing rule compliance. These gaps include using broad descriptions rather than specific guidelines, a lack of coverage for all marketing channels, and policies that the regulator said were overly informal or outdated.

The alert also raised alarms on untrue statements and misleading information within advertisements. Among several examples, the SEC pointed to advisors claiming to be “free of all conflicts” when actual conflicts existed, and misrepresentations about the advisors’ qualifications and services.

Some advisors also went offside by playing up the nature of their investment processes or services, the regulator said, with claims that they adhere to nonexistent ethical standards or falsely stating that they follow ESG investment mandates.

The SEC flagged cases of firms misusing