SEC slams $36B RIA Creative Planning for failure to review radio ads
It may be tempting to overlook low-budget radio ads, but Creative Planning, one of the nation’s largest RIAs with around $36 billion in AUM, learned its lesson the hard way: don’t take the spots for granted.
The RIA, which has eschewed acquisitions and instead grown rapidly by spending on marketing and advertising, paid a $200,000 fine to the SEC because the firm didn’t review a local radio host’s improvised comments while reading its commercials on air.
In an additional SEC action, Peter Mallouk, Creative Planning’s president, agreed to pay a $50,000 penalty for not reporting the existence of three securities accounts he opened several years ago that benefited family members.
Creative Planning and Mallouk violated sections of the Investment Advisers Act, according to the SEC’s public administrative and cease-and-desist proceedings.
According to the agency, Creative Planning “distributed hundreds of radio advertisements that contained prohibited client testimonials and failed to enforce the firm’s code of ethics” with regard to the ads.
The firm also failed to “report and review of certain securities accounts in which the firm’s president had a beneficial interest and failed to keep true and accurate books and records,” the SEC stated.
The RIA, based in Overland Park, Kansas, a suburb of Kansas City, bought pre-recorded and live ads on a local radio station beginning in 2015. The next year, one of the hosts of the morning show on which the commercials aired became a Creative Planning client. Going off-script, the host began praising the firm while reading its ads live on the air during what are known as “live reads.”
"We will never do a live read again," says Creative Planning president Peter Mallouk.
According to the SEC, “no one at CPI [Creative Planning, Inc.] told the radio station or the radio host that they could not air testimonials in radio advertisements for CPI, and CPI did not listen to, monitor, or obtain copies of any of the live spots that the radio station aired for CPI.”
“When radio hosts create content on their own, we had a duty to review, which we didn’t do,” Mallouk says. “The lesson we learned wasn’t to review live reads more carefully in the future, but never do a live read again.”
As for the family accounts that weren’t submitted for review, Mallouk says they were all “invested in the exact same positions as our clients.”
Not reporting them, he says, was “my mistake.”