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Advertising Compliance
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Boston Advisor Found $50 Million In Fake Refunds For Clients, Tried To Pay His Own IRS Bill With Fake Checks |
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Friday, January 27, 2012 14:35
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Tags: IRS An especially ambitious advisor has been convicted on nine tax counts as well as contempt of court for filing fake IRS returns for his clients while skipping his own taxes.
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Kevin Mahoney seems to have generated more than $50 million in false tax refunds, including some six-digit checks for himself.
That was when he filed a personal return at all.
IRS records showed that he skipped 1996 through 2001 and then tried to pay a $2 million assessment with fake checks, third-party loans, and other worthless paper.
The activities were especially egregious given the fact that Mahoney had already been banned from tax work since 2002.
He has yet to be sentenced but could face jail time.
Mahoney dropped all his securities registrations in 2006 in the wake of a bankruptcy filing but went on practicing "estate planning" and other specialties under various corporate identities.
Read more...
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Do FINRA and SEC Disclosures Drive You Nuts? Here's Your Chance To Let The SEC Know How To Fix It |
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Thursday, January 19, 2012 14:44
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Tags: compliance | Dodd-Frank | FINRA | sec Do you think advertising disclosure rules are unnecessarily complicated? Unfair? How would you improve them? Here’s your chance to let the Securities and Exchange Commission know your ideas for making the system better.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
- Aggregation of news from dozens of sites targeting wealth managers
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The SEC is seeking comment on ways to improve disclosures before selling securities and securities products to investors or before hiring an advisor.
“The SEC is seeking comment on methods to improve the timing, content, and format of disclosures to investors regarding financial intermediaries, investment products, and investment services,” says the request for comments posted on the agency’s website. “It also requests comment on information that retail investors need to make informed financial decisions on hiring a financial intermediary or purchasing an investment product or service typically sold to retail investors, including mutual funds. In addition, the SEC seeks comment on how to make investment expenses and conflicts of interest in investment transactions more transparent to investors.”
Personally, I’d like to see the FINRA’s CRD and the SEC’s ADV database made to be indexed by search engines and searchable on the Web. That transparency would make it really easy for retail investors to find out about an advisor’s regulatory record and would aid advisors with clean records.
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Massachusetts Regulators Suggest Disclosure For Advisors Whose Clients "Like" Them |
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Thursday, January 19, 2012 14:15
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Tags: Social Media After an exhaustive study, the Massachusetts Securities Division has concluded that state-regulated advisors can use social media as long as they treat the communications as advertising -- and are mindful of the interactive nature of the format.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
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In general, the state's guidelines follow the SEC's lead in classifying Facebook posts, Tweets, and other online public messaging as advertising.
But given its rich technological base, Massachusetts drills down deeper into areas of potential endorsement and selective editing.
Their regulators agree with the SEC that if a client "likes" an advisor's page or post, it could be a testimonial. But they spell out that a "like" in itself does not constitute a compliance problem:
"The purpose of the testimonial prohibition is to avoid the mistaken impression of a reader that the experience of one client is likely to be achieved in the reader’s particular circumstances. Facebook 'likes' by themselves are not likely to give rise to such a mistaken impression."
Still, the state recommends that advisors warn clients not to post positive reviews. And disclosure should include language about how "likes" do not reflect any kind of endorsement.
The state also formally extended its guidance on when advisors "adopt" third-party content or are "entangled" in its creation to social media. In brief, if you edit or promote it, you're responsible.
Massachusetts suggests advisors review their site once a day to avoid problems.
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SEC To RIAs: Don't Use Facebook "Like" Buttons; SEC Provides Guidance On What Constitutes A Testimonial |
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Monday, January 09, 2012 20:06
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The U.S. Securities And Exchange Commission does not like Facebook “like” buttons to be used by Registered Investment Advisers, or at the very least wants RIAs to use “like” buttons very carefully.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
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The staff of the Securities and Exchange Commission’s Office of Compliance and Examinations (OCIE), which inspects federally regulated Registered Investment Advisers, published a National Examination Risk Alert last week that provides RIAs with guidance on their use of social media. Most of the guidance contained in the seven-page document was nothing new. However, OCIE did directly address the use of a Facebook “like” button by RIAs and shed some light on what constitutes a “testimonial.”
“The term ‘testimonial’ is not defined in Rule 206(4)-1(a)(1), but SEC staff consistently interprets that term to include a statement of a client's experience with, or endorsement of, an investment adviser,” says the SEC alert. “Therefore, the staff believes that, depending on the facts and circumstances, the use of “social plug-ins” such as the “like” button could be a testimonial under the Advisers Act.
“Third-party use of the “like” feature on an investment adviser’s social media site could be deemed to be a testimonial if it is an explicit or implicit statement of a client's or clients' experience with an investment adviser or IAR,” the SEC staff adds. “If, for example, the public is invited to “like” an IAR’s biography posted on a social media site, that election could be viewed as a type of testimonial prohibited by rule 206(4)-1(a)(1).”
The SEC is basically saying it’s going to look at whether a “like” button is soliciting and publishing testimonials for an RIA. That's prohibited.
While an RIA can presumably use a like button on a posting about new tax rules or on an article saying the economy is doomed, it would be unwise for RIAs ask people to “like" your firm or you. Similarly, seeking “fans” is a bad idea. The SEC says it could constitute using a testimonial in your advertising, which is prohibited.
Of course, RIAs, IA reps, and solicitors also should not seek and publish “recommendations” on LinkedIn. That’s been widely known in the investment advice business for at least two or three years.
You can’t stop clients from publishing recommendations for your on their LinkedIn profile pages—that’s their Fifth Amendment right—but you may not publish their recommendations on your LinkedIn page or elsewhere.
What the SEC says in the alert about testimonials is also helpful in clarifying what RIAs, IA reps, and solicitors can and can't do with regard to using social media profile popularity tools, it leaves plenty of gray areas.
For example, does the SEC object to an advisor using target client profiles in marketing materials? This is a fairly common marketing device wherein an RIA explains its investment advise services by providing prospective clients with digital or hard-copy content about a use case for an RIA's services, highlighting how the RIA worked with an unnamed retiree, doctor or other target client. (A disclosure says the target client is not a real person.) Such composites are commonly used by RIAs without any known objections by OCIE.
Generally, the SEC is not effusive in offering RIAs guidance on how they can use new communications technology like social media because most of the rules are fairly straightforward: disclose conflicts, do what’s best for the client, don’t lie, don’t commit fraud, follow recordkeeping rules, and maintain and create policies governing services and communications.
Getting any guidance on social media use by RIAs is really helpful to RIAs, particularly guidance on like buttons, which are used by Google Plus and other social networking sites but were popularized by Facebook.
For the record: A discussion on A4A December 21 addressed the need for guidance from the SEC on like buttons. “We won't know for sure that "likes" are the same as testimonials unless the SEC takes disciplinary action against an RIA and makes that action public. But many RIAs are already using 'likes' on their websites and have not been slapped. Not yet, at least.”
It's good the SEC has cleared this up. Gives RIAs a chance to clean up their mistakes before they're examined.
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Former FBI Agent In Court On Ponzi Charges |
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Thursday, October 13, 2011 11:47
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Tags: fraud An interagency task force has uncovered what looks like an early-stage Ponzi scheme operating in a former FBI special agent's RIA firm.
If you're a private wealth advisor, please join Advisors4Advisors (A4A) to get its full benefits. Register now, and we will donate $20 of our $60 membership fee to Bubbles The Clown’s financial literacy program, and you can post an icon on your website saying you support Bubbles' 501(c)3 charitable organization. Plus, get other membership benefits, including: - Analysis daily of issues affecting advisors
- Aggregation of news from dozens of sites targeting wealth managers
- Reviews by advisors of practice management applications
- 30 independent experts blogging on advisor business issues
- 24/7 access to webinars with 50 hours of CFP® CE and 100 hours of IMCA CE
Register Now | |
Former agent John Robert Graves of Fredericksburg, Virginia and his wife, Sara Turberville Graves, are charged with fraud and violations of the IA Act.
Specifically, investigators from the Department of Justice and the Financial Fraud Enforcement Task Force say Graves bilked clients out of $1.3 million.
Graves resigned from the FBI in 1999 before starting the firm in 2002. At some point in the last three years, he and his wife appear to have gotten the urge to start a Ponzi scheme.
Court filings indicate that they make false claims about the investment products on their platform -- "low risk, high return" -- and then kept the money for themselves.
They bought into a time share, paid their credit card bills, and kept some of the proceeds floating around the firm to satisfy clients who wanted their money back.
If convicted on all counts, Mr. Graves could be sentenced to up to 140 years in jail. His wife, not a registered advisor, could face a jail term up to 120 years.
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