The Securities and Exchange Commission has fined another advisory firm for marketing rule-related violations.
On Monday, the SEC said that it had levied a $1 million penalty against Wellesley Asset Management for making material misstatements and omissions in marketing materials to certain advisory clients and prospective ones concerning an index that WAM created in January 2013 to depict the performance of its convertible bond investment strategy from January 2000 forward.
WAM used WAM Index performance graphs in advertisements from February 2015 to March 2022, a period when WAM's investment strategy focused exclusively on convertible bonds, the SEC order explains.
"WAM's written advertisements, however, failed to fully and fairly disclose the methodologies it used to construct the index," the SEC said.
Among other things, WAM at times failed to adequately disclose that the WAM Index included hypothetical performance, according to the order.
"WAM also presented the WAM Index's performance during at least three client webinars and misstated that the WAM Index represented composite returns from its convertible bond strategy," the order states.
WAM voluntarily discontinued advertising the WAM Index in March 2022.
WAM violated Sections 206(2) and 206(4) of the Advisers Act and Rule 206(4)-1 thereunder by publishing, circulating, and distributing advertisements that contained misleading statements of material fact.
In addition, WAM failed to design and implement written compliance policies and procedures regarding advertising-related disclosures in violation of Section 206(4) of the Advisers Act and Rule 206(4)-7 thereunder.
