An investment adviser settled SEC charges for improperly promoting hypothetically back-tested performance information.
The SEC found that the adviser did not disclose that its investment strategy was not entirely consistent with its promoted hypothetical strategy. The SEC also found that the adviser distributed tear sheets with hypothetical performance results to third-party advisers, but failed to preserve copies of these advertisements.
The SEC charged the adviser with violations of IAA Rules 206(4)-7 ("Compliance Procedures and Practices") and 204-2 ("Books and Records to Be Maintained by Investment Advisers"). The SEC noted that the adviser voluntarily took prompt remedial action, including implementing a policy prohibiting the advertisement of hypothetical performance results.
Without admitting or denying the SEC findings, the adviser agreed to (i) a cease-and-desist order, (ii) a censure and (iii) a $70,000 civil penalty.
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