An investment adviser always has a conflict of interest. An adviser should never say there are no conflicts.
You take money from your client for fees. Conflict
You get paid differently depending on the client asset. Conflict
You get paid distribution fees: Conflict
If you put in an advertisement that you have no conflicts, an SEC examiner will see it and regulatory problems will arise. A firm’s website is an advertisement. You have it to attract clients. If you put on your website that you have no conflicts, an SEC examiner will see it and regulatory problems will arise.
This was the case with a firm located here in suburban Boston.
5. After the November 4, 2022 compliance deadline for the Marketing Rule, Meridian published a communication on its public website that constituted an “advertisement” because it offered investment advisory services with regard to securities to prospective clients and offered new investment advisory services with regard to securities to current clients. As the communication was published on a public website, it was made to more than one person.
6. This advertisement contained the material statement of fact that Meridian “refuse[d] all conflicts of interest” without providing any context for this claim. However, Meridian has recognized conflicts of interest inherent in providing investment advisory services, including conflicts of interest disclosed in its Form ADV Part 2A brochure. The brochure also indicated that Meridian would disclose certain conflicts of interest to clients or take some steps to mitigate conflicts of interest. As a result, Meridian lacked a reasonable basis for believing it would be able to substantiate upon demand by the Commission the material statement of fact appearing in its advertisement that it “refuse[d] all conflicts of interest.”
I found it interesting that the SEC did not make the claim that the “no conflicts” was misleading or false. Instead it took the position that Meridian could not substantiate the position, as required under the Marketing Rule.
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