Submitted by nsscadmin on
It’s tax time and that means investors are about to be bombarded with advertisements telling them to invest before the income tax deadline.
Late last year an employee at the Commission heard a local radio advertisement that raised a few eyebrows. Recent questions around advertising and the arrival of tax season led us to create this blog post to let investors know what is not allowed in investment advertising.
Most obligations around what a registrant can and can’t say in advertising revolve around their duty to act in good faith, their category of registration, suitability obligations, and rules around holding out.
Under their duty to act in good faith, a registrant cannot include things like a guaranteed rate of return and offer unsubstantiated claims.. So, if you hear or see an advertisement promising specific returns, or advising you to sell a certain type of investment in favor of buying another, it is likely not allowed.
A registrant also cannot advise on securities that do not fall under their category of registration. For example, if I was registered as a mutual fund dealer I cannot develop an advertisement in which I recommend the purchase of stocks or exempt market securities.
Then there’s holding out. Under these rules a registrant cannot portray themselves as something they are not. For example, they cannot portray themselves as a financial planner if they do not have the certification and qualifications that gives them that title. Or, another example, they cannot portray themselves as a portfolio manager if they are not registered as one.
The Commission recommends that investors carefully consider investment advertisements or marketing material for things such as unrealistic statements, generalized advice (without a personal suitability assessment), unsubstantiated claims, and guaranteed returns. Remember that if it sounds to good to be true, it probably is. If you have a question about a specific advertisement, please contact us.