SEC Levies $850,000 in Penalties Against Nine Investment Firms for Marketing Rule Violations

The U.S. Securities and Exchange Commission (SEC) has taken action against nine investment advisory firms, imposing a collective $850,000 in civil penalties for marketing rule violations. The SEC's enforcement centers around the firms' promotion of hypothetical performance data without implementing the necessary policies mandated by regulators. These actions were found to be in breach of a 2020 rule designed to restrict advisers from showcasing hypothetical performance to investors unless specific policies were in place to ensure its relevance to the intended audience, among other requirements.

The investment advisory firms facing penalties include Banorte Asset Management, BTS Asset Management, Elm Partners Management, Hansen and Associates Financial Group, Linden Thomas Advisory Services, Macroclimate, McElhenny Sheffield Capital Management, MRA Advisory Group, and Trowbridge Capital Partners, as announced by the SEC in an official statement.

In response to the SEC's allegations, the charged companies neither admitted nor denied the accusations but have consented to the penalties imposed. The financial penalties levied against these firms vary, with amounts ranging from $50,000 to $175,000, according to the SEC's statement.

The SEC's actions underscore the importance of compliance with regulations surrounding the advertising and promotion of financial products and services, particularly concerning the use of hypothetical performance data. Such rules are aimed at safeguarding investors and ensuring transparency and accuracy in the information provided by investment advisers. Violations of these rules can result in regulatory penalties and reputational damage for financial firms.