Massachusetts RIA Agrees to Settlement with SEC Over Marketing Violations
From the desk of Jim Eccleston at Eccleston Law
Massachusetts-based RIA Wellesley Asset Management (WAM) will pay a $1 million civil penalty to resolve allegations of using hypothetical performance information in advertisements without adequate disclosures.
The settlement also includes a cease-and-desist order and censure, with Wellesley neither admitting nor denying the SEC's findings. It is worth noting that this case is not subject to the SEC's Ad Rule, as the alleged non-compliance occurred before the rule's compliance date despite recent enforcement actions related to hypothetical performance lapses under the rule.
The SEC found that WAM presented index performance metrics in at least three client webinars and incorrectly claimed that the index reflected, "composite returns," from its convertible bond strategy. According to Wealth Management.com, despite making further revisions to its disclosures, the firm did not rectify its use of hypothetical performance, although it ceased using index advertisements in March 2022.
The SEC recognized WAM's efforts to address the compliance issues in the order. As part of these efforts, the firm will discontinue its advertisements featuring the index and will terminate its contract with the index calculation agent, effectively discontinuing the index itself.
Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.
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