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๐‡๐ฒ๐ฉ๐จ๐ญ๐ก๐ž๐ญ๐ข๐œ๐š๐ฅ ๐๐ž๐ซ๐Ÿ๐จ๐ซ๐ฆ๐š๐ง๐œ๐ž ๐€๐๐ฏ๐ž๐ซ๐ญ๐ข๐ฌ๐ข๐ง๐ : ๐’๐„๐‚’๐ฌ ๐‚๐ซ๐š๐œ๐ค๐๐จ๐ฐ๐ง ๐จ๐ง ๐ˆ๐ง๐ฏ๐ž๐ฌ๐ญ๐ฆ๐ž๐ง๐ญ ๐€๐๐ฏ๐ข๐ฌ๐ž๐ซ๐ฌ

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Recently, the U.S. Securities and Exchange Commission (SEC) settled charges against the five Registered Investment Advisers (RIA) for Marketing Rule violations under the of Investment Advisers Act, 1940 for penalties totalling $200,000 as hereunder:

(i) GeaSphere LLC – $100,000

(ii) Bradesco Global Advisors Inc. – $20,000

(iii) Credicorp Capital Advisors LLC – $30,000

(iv) InSight Securities Inc. – $30,000 

(v) Monex Asset Management Inc – $20,000

SEC had alleged that these RIAs advertised hypothetical performance to the general public on their websites without adopting and implementing policies and procedures reasonably designed to ensure that the hypothetical performance was relevant to the likely financial situation and investment objectives of each advertisementโ€™s intended audience. 

Further, GeaSphere was also alleged to have made false and misleading performance claims. On its public website, hypothetical performance that consisted of performance derived from model portfolios and performance that was backtested by applying strategy to data from prior time periods when the strategy had not actually been used. They also distributed hypothetical performance to a wide audience without tailoring it to the likely financial circumstances and investment goals of the intended recipients

Similarly, against other four RAIs, the allegations were that the advertisements made by these RAIs included hypothetical performance that consisted of performance derived from model portfolios and that the advertisements were disseminated to the general public rather than to a particular intended audience. Further, these RAIs had failed to adopt and implement policies and procedures reasonably designed to ensure that the performance was relevant to the likely financial situation and investment objectives of the intended audience.

In India, the while SEBI, does not per se require to make advertisements audience specific, it however prohibits the Investment Advisors under to make statements which are false, misleading, biased or deceptive, based on assumptions or projections, assuring returns or risk free return. However, last year SEBI has issued a Consultation Paper on creation of a Performance Validation Agency (PVA) to validate any claims of performance by SEBI registered intermediaries.

A copy of the SEC orders are attached herewith.

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