Five registered investment advisers agreed to pay a total of $200,000 in penalties for allegedly violating the Securities and Exchange Commission’s (SEC) amended marketing rule.
Rhode Island-based Gea Sphere agreed to pay a civil penalty of $100,000 for advertising hypothetical performance to the general public on its website “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,” the SEC said Friday in a press release.
Four other firms received reduced penalties by taking corrective steps in advance of being contacted by the agency. Miami-based Credicorp Capital and Houston-based Monex Asset Management each agreed to pay $30,000 to settle the charges, while Florida-based Bradesco Global Advisors and Illinois-based InSight Securities paid $20,000 each.
The SEC said Gea Sphere violated other agency rules, including “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.” In addition, the firm allegedly committed recordkeeping and compliance violations and made misleading statements about its performance to a client.
The actions represented the second enforcement sweep by the SEC on violations of its amended marketing rule, following its announcement of fines totaling $850,000 levied against nine firms in September. A penalty of $1 million was handed down against Titan Global Capital Management USA in August.
The SEC’s amended marketing rule carried a compliance deadline of November 2022.
Compliance considerations: Gea Sphere failed to implement policies in its compliance manual that required its chief compliance officer to review and approve all marketing materials in writing, maintain a log of such approvals, and obtain written confirmations from persons giving paid endorsements of the firm’s performance. The firm also failed to conduct an annual review of the adequacy of its investment advisory compliance program, the SEC said in its order.
All the firms agreed to settle without admitting or denying the agency’s findings.
Gea Sphere did not respond to a request for comment.
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