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Rule 206(4)-1 under the Advisers Act prohibits SEC-registered investment advisers from using any advertisement that contains any untrue statement of material fact or that is otherwise misleading. The rule broadly defines "advertisement" to include any notice, circular, letter, or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio or television, that offers any investment advisory service.
In addition, an advertisement may not:
use or refer to testimonials (which include any statement of a client's experience or endorsement);
An adviser may advertise its past performance (both actual performance and hypothetical or model results) only if the advertisement meets certain conditions and restrictions. An advertisement using performance data must disclose all material facts necessary to avoid any unwarranted inference. Among other things, an investment adviser may not advertise its performance data if the adviser: (1) fails to disclose the effect of material market or economic conditions on the results advertised; (2) fails to disclose whether and to what extent the advertised results reflect the reinvestment of dividends or other earnings; or (3) suggests or makes claims about the potential for profit without also disclosing the potential for loss.
In addition, generally an adviser may not advertise gross performance data (i.e., performance data that does not reflect the deduction of various fees, commissions, and expenses that a client would pay) unless the adviser also includes net performance information in an equally prominent manner. An adviser may provide gross performance information, accompanied by appropriate disclosure regarding the impact of fees and expenses, in certain limited circumstances that present minimal risk that the client will not understand the impact of fees and expenses, such as when the client is a sophisticated institution, and the adviser presents the information to the client "one-on-one."
There are some good resources throught the Practicing Law Institute (PLI) - see link below
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My firm is looking to advertise for some seminars. My firm is an RIA. Speaking at the seminar will be 3 managers of hedge funds. I am going to advertise as the RIA and invite accredited invstors only. I am trying to find the actual laws that speak to what is allowed to promote an event like this.
I look forward to your answer.
Section 201 of the Investment Advisers Act of 1940 (“Advisers Act”) sets forth the basis for the Advisers Act.
The main components of the Act are described below.
1. The Advisers Act defines “investment adviser”, provides exceptions to the definition and establishes the requirement for federal registration on Form ADV.
2. Recordkeeping and reporting requirements are set forth in the Act. Also included is the SEC's right to make reasonable and periodic or special examinations (Both components were added by amendments to the Advisers Act in 1960).
3. Each registered adviser is required to deliver ADV Part II or a written disclosure statement containing the information contained in Part II to clients.
4. Advisers are required to have written policies and procedures designed to prevent the use of material, nonpublic information by the investment adviser or any person associated with the adviser (Added by 1988 amendments).
5. Investment adviser contract standards contain restrictions on certain adviser performance fee compensation arrangements and prohibit the assignment of the advisory contract without client consent.
6. Prohibited transaction provisions address defrauding clients or engaging in conduct that operates as a fraud or deceit. Advisers are required to disclose to clients the capacity in which the adviser acts in a transaction and obtain client consent, for example, if the adviser is acting in a principal capacity for its own account and selling to or buying from a client.
7. Rules under the Advisers Act also cover: advertisements by investment advisers;
custody or possession of funds or securities of clients; payment of a cash fee to a solicitor for its solicitation activities; financial and disciplinary information disclosure to clients; requirement for written proxy voting policies; and requirement for written compliance policies and procedures, and annual review of their adequacy and designation of a chief compliance officer.
State securities laws are preempted by the Advisers Act in many respects. If an investment adviser manages at least $30 million in assets, or advises a mutual fund, it is required to register with the SEC. Advisers with at least $25 million but less than $30 million in assets may elect to register with the SEC. Other investment advisers register only with the state in which the adviser maintains its principal place of business. If a state does not require advisers to register, advisers located in the state are regulated by the SEC. (Currently, Wyoming is the only such state.) If an adviser representative for a SEC-registered adviser has a place of business in a state, that state may require licensing of the adviser representative. The states retain the authority to initiate action for fraud against advisers.
The National Securities Markets Improvement Act of 1996 (“NSMIA”), Title III, Investment Advisers Supervision Coordination Act, amended the Advisers Act to exempt from Advisers Act registration, and thereby subject certain advisers primarily to state regulation, any adviser regulated in the state in which it maintains its principal office and place of business and that has less than $25 million in assets under management and that does not advise a registered investment company. Subsequent SEC rules permit an adviser to defer registration with the SEC until its assets under management reach $30 million.
Here is a link to the Nevada Statutes-
Helpful resources for finding local legal counsel and legal information are www.martindale.com and www.findlaw.com
I still haven't found any guidlines that talk about what an RIA can advertise. My seminars will have some hedge fund managers presenting their strategies. I'm wondering what I am allowed to advertise for events like this.
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