Private Bank Fined $4 Million for Stretching Truth in Marketing Materials
The SEC fined a large wealth manager $4 Million for distributing marketing materials that misled clients about adviser compensation. The SEC asserts that the firm’s private banking group falsely claimed (in marketing cards, website information, and pitch books) that its advisers were only compensated based on client performance. Although the advisers did not receive commissions, they were paid salaries and bonuses that did not relate to client performance. The SEC also faults the firm for failing to heed objections raised by several employees, including a compliance officer, about the statement’s accuracy. The compliance department did approve the materials but did not assume responsibility for verifying the accuracy of statements made.
OUR TAKE: Compliance officers struggle with how to best verify the accuracy of marketing material assertions. Generally, they do not have the resources or time to double check every statement. And, as this case shows, compliance can’t rely solely on the marketing folks to verify accuracy. One option is to conduct a retrospective review on a periodic basis to test a cross-section of materials. If the firm does not have the internal resources, this may be a good job for a third party compliance or law firm.