Never Before Examined? How to Prepare for an SEC Exam

3. Critically review your firm’s marketing materials. As part of this review, firms should look out for misleading information, inconsistencies across marketing materials and a lack of back-up materials to substantiate claims. For example, a firm may be penalized if the materials discuss the performance of the entire portfolio but do not note that one investment represented a material portion of the whole return. In the past, the SEC has also looked for discrepancies between the information contained in marketing materials as compared to information posted to an advisor’s password-protected website or provided in a regulatory filing (Form PF, for example). To prevent inconsistencies in marketing materials, firms should implement a formal review process across all materials, including ADV disclosures. Language must also be used carefully so that it is not misconstrued or promissory in nature. Often, qualifiers such as “generally” and “seeks to” can be used to help soften statements made.

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