Advertising materials used by stock brokerage firms must provide clients with accurate information. The Securities and Exchange Commission prohibits false or misleading statements in marketing communications.
Printed, online and phone communications may not omit material facts that might influence an investor’s decision. Statements regarding potential performance that lack a fair and balanced outlook regarding risks and limitations may appear misleading.
Several types of communications fall under the SEC compliance rules
The SEC requires companies to comply with its marketing rules when issuing any type of direct or indirect communication to a client. Conversations, whether in-person, over the telephone or during a video chat may classify as marketing. They must accurately describe the services offered.
Emails, websites and printed mailers all fall within the guidelines of the marketing rules. If promotional materials contain client testimonials, a statement must disclose details regarding their source. A client or third party may, for example, have received an incentive for providing a favorable rating.
Online stock brokerage app fined for deceptive practices
The SEC filed a complaint against a popular online stock trading app alleging it misled clients with deceptive marketing. The company failed to disclose that it offered free stock trades by selling its clients’ orders to third-party trading firms for execution. In spite of their commission-free trades, clients did not obtain favorable trading prices. According to CNN, the company agreed to pay a fine of more than $60 million in response to charges that its marketing statements deceived its clients.
Investors experiencing financial losses resulting from a marketing rule violation may file a legal action for damages. Deviating from marketing rules may result in the SEC also filing civil or criminal charges.