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 After a quick look, Vasilev urged him to immediately take it down.
The site included claims such as, “Tired of losing money in the
stock market? We can fix that.” It also featured videos of the
adviser giving seminars, in which he discussed good stock picks he’d
made. The site had almost no disclosures.
“He had proof on his website of all the non-compliant things he’d
been doing,” said Vasilev, who co-founded Red Oak Compliance
Solutions in Cedar Park, Texas.
Many advisers prioritize marketing over compliance on their
websites, leaving them open to lawsuits from disgruntled clients and
regulatory actions.
Vasilev helped the adviser revamp his site, toning down written
promises, removing seminar videos and inserting disclosures on each
PowerPoint slide he had posted.
“Oftentimes there’s a compliant way to get to where they want to go.
It’s just not the way they went,” she said.
The details are important because an adviser's website is often a
regulator's introduction to the firm, said Amy Lynch, founder of
Rockville, Maryland-based FrontLine Compliance.
“You could have an SEC examiner looking at your website right now,”
she said.
Regulatory experts suggest a few basic questions that advisers can
raise with their compliance departments to help make sure a website
includes the proper controls to keep regulators happy:
1. Is there a boilerplate disclosure at the bottom of every page of
the site?
This must include details such as a firm's name, the regulatory
bodies it registers with, states in which advisers can or cannot
work, and contact information. Nuances can vary, depending on
whether the adviser registers with the U.S. Securities and Exchange
Commission or states, or is a broker licensed by the Financial
Industry Regulatory Authority (FINRA), said Vasilev, the compliance
expert.
2. Are there disclaimers about information that comes from outside
sources?
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Advisers' websites should make clear when certain information, such
as blog posts or news stories, was not written in-house. Point out
that outside information may not be accurate, nor is it necessarily
endorsed by the firm. Remember, the disclaimer does not release
advisers and firms from the obligation to review those details.
3. Does performance information include proper disclosures?
Advisers who advertise the performance of portfolios they manage
should show figures that are calculated after subtracting all fees,
said Lynch, the compliance consultant. The disclosure may describe
the steps used to calculate returns. It should state that past
performance does not indicate future results.
4. Do you have regularly scheduled compliance checks of your
website?
An adviser's compliance department should check the site at least
quarterly to make sure the information is still accurate.
There are many other rules a compliance officer should know about.
They include disclaimers for professional designations, types of
labels advisers use to convey a certain expertise. Consider hiring a
compliance consultant to double check your compliance officer’s
work.
(Reporting by Jennifer Cummings; Additional reporting by Jason
Wallace; Editing by Suzanne Barlyn and Andrew Hay)
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