RIA Compliance and Practice Management Blog

Top 2017 NASAA RIA Compliance Deficiencies: Advertising

Posted by RIA in a Box

Jan 11, 2018 2:11:32 PM

2017 state investment adviser compliance deficencies: advertising

Last October, the North American Securities Administrators Association ("NASAA") released its 2017 Investment Adviser Coordinated Examinations Report. The biannual report is a must read for registered investment adviser ("RIA") firms. As RIA compliance consultants, we recommend that the Chief Compliance Officer ("CCO") of all investment advisory firms review the regulatory exam summary report to determine if any compliance changes need to be implemented at their firm.

In this week's installment of our break-down of the new 2017 report, we focus on one of NASAA's most common RIA regulatory compliance deficiency categories: advertising. Of the 1,227 investment advisory firms examined in 2017, 19.1% of all firms examined with regulatory assets under management ("AUM") had at least one advertising-related regulatory deficiency. In total, there were 230 advertising-related deficiencies cited across all firms which were audited.

Download the SEC 2017 RIA Top 10 Exam Priorities Checklist

Compared to 2015, the frequency of advertising-related deficiencies has marginally increased. Since 2007, advertising-related deficiencies have gone up and down noting the largest increase in advertising-related deficiencies from 2009 to 20011. The table below highlights the changes over the last 10 years of reports:

2017 investment adviser advertising deficiencies

In 2017, the top 5 advertising-related deficiencies were:

  1. Misleading qualifications, services, or fees (19.1%)
  2. Other untrue or misleading statements (14.8%)
  3. Insufficient website disclaimer (12.2%)
  4. Testimonials (11.7%)
  5. Misuse of "RIA" or "IAR" (9.1%)

In 2015, the top 5 advertising-related deficiencies were:

  1. Untrue or misleading statements or omissions: qualifications, services, or fees (23.8%)
  2. Other untrue or misleading statements or omissions (16.5%)
  3. Testimonials (13.4%)
  4. Insufficient website disclaimer (12.8%)
  5. Misuse of "RIA" and "IAR" (12.8%)

Given the ups and downs of advertising-related deficiencies from 2007 to 2017, it's evident that investment advisory firms need to take a step back and ensure they are meeting the requirements to stay in compliance with the relevant state or federal regulatory requirements. To avoid advertising-related compliance issues, RIA firms should review all advertisements, including its website, for accuracy and proper disclosures. As RIA compliance consultants, we strongly encourage the CCO of the investment advisory firm to review all of the firm’s marketing materials and to continue to exercise great caution when considering performance advertising or marketing.

Be sure to also check out our past blog post on the top investment adviser financials compliance deficiencies from the 2015 NASAA report.

Download the Top RIA Compliance Deficiencies 2015 Infographic 

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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