Inaccurate performance claims and advertising violations are always in the top 3 of compliance deficiencies found by SEC and state examiners. It is axiomatic that the Advisers Act and similar state statutes prohibit investment advisers from making misleading statements or omitting material facts in connection with conducting an investment advisory business. Examples of “problematic” performance advertising typically found by examiners include:

  1. Advertising only on the adviser’s profitable past, specific recommendations.
  2. Making inflated claims of performance.
  3. Failing to disclose material information about how the adviser’s performance results were calculated.
  4. Comparing performance to an inappropriate index.
  5. Using testimonials that include statements of a client’s experience with or endorsement of the adviser.
  6. Failing to maintain adequate supporting documentation for all performance claims.