The SEC censured and fined an investment adviser and its principal for allowing a radio station to air testimonials. The adviser purchased radio spots that aired over a two-year period, during which one of the radio hosts became a client. During both live and pre-recorded segments, the radio host noted his relationship with the firm, expressed his satisfaction, and praised his wealth manager by name. The SEC faults the adviser for failing to take any action to monitor the spots (including by declining to accept transcripts offered by the radio station). Separately, the SEC also accuses the adviser’s principal with failing to report personal securities accounts to the firm’s Chief Compliance Officer.
OUR TAKE: This failure to monitor media also applies to social media where firms have an obligation to squelch potential client testimonials on sites that the firm makes available (e.g. Web page, LinkedIn, Facebook).