The Investment Adviser Advertising Rule
On September 14, 2017, the SEC Office of Compliance Inspections and Examinations (“OCIE”) issued a risk alert identifying the most frequent compliance violations to the investment adviser’s advertising rule.
The Advertising Rule
The “Advertising Rule” found in Rule 206(4)-1 under the Investment Advisers Act of 1940 (the “Advisers Act”) prohibits an adviser from directly or indirectly publishing, circulating or distributing any advertisement that contains any untrue statement of material fact, or that is otherwise false or misleading. “Advertising” includes any “notice, circular, letter or other written communicated addressed to one or more persons or any notice or other announcement published or made by radio or television which offers (1) any analysis, report, or publication concerning securities, or which is to be used in making any determination as to when to buy or sell any security, or which security to buy or sell, or (2) any graph, chart, formula, or other device to be used in making any
SEC Announces Examination Priorities For 2017
On January 12, 2017, the SEC announced its Office of Compliance Inspections and Examinations (OCIE) priorities for 2017. The OCIE examines and reviews a wide variety of financial institutions, including investment advisors, investment companies, broker-dealers, transfer agents, clearing agencies and national securities exchanges. The OCIE examination goals are to promote compliance, prevent fraud, identify risk and inform policy.
The priorities this year have a primary focus on (i) protecting retail investors, especially those saving for retirement; (ii) assessing market-wide risks; and (iii) new forms of technology, including automated investments advice.
The SEC shares its annual examination priorities as a heads-up and to encourage industry participants to conduct independent reviews and make efforts for increased compliance, prior to an SEC examination, investigation or potential enforcement proceeding. Moreover, the SEC chooses its priority list in conjunction with discussions with all divisions of the SEC and other market regulators and identifies what it believes are the areas that present heightened risk to investors
SEC Issued Risk Alert on Options Trading Used to Evade Short Sale Requirements
On Friday August 9, 2013, the Securities and Exchange Commission issued a Risk Alert to help market participants detect and prevent options trading that circumvents an SEC short sale rule.
The SEC’s Office of Compliance Inspections and Examinations (OCIE) issued the alert after its examiners observed options trading strategies that appeared to evade certain requirements of the short-sale rule. The alert describes and warns of the strategies used by some customers, broker-dealers and clearing firms, summarizes related enforcement actions, and makes suggestions regarding practices found to be effective in detecting and preventing trading intended to evade Regulation SHO.
Regulation SHO tightened requirements for short sales, which involve the selling of securities not already owned, usually by the borrowing of securities. Short sellers
