(The writer is a Reuters contributor. The opinions expressed are her own.)
By Jennifer Cummings
July 10 (Reuters) - Compliance consultant Cathy Vasilev answered a call about a month ago from a financial adviser who asked her to review his sleek new website.
After a quick look, Vasilev urged him to immediately take it down. The site included claims such as, “Tired of losing money in the stock market? We can fix that.” It also featured videos of the adviser giving seminars, in which he discussed good stock picks he’d made. The site had almost no disclosures.
“He had proof on his website of all the non-compliant things he’d been doing,” said Vasilev, who co-founded Red Oak Compliance Solutions in Cedar Park, Texas.
Many advisers prioritize marketing over compliance on their websites, leaving them open to lawsuits from disgruntled clients and regulatory actions.
Vasilev helped the adviser revamp his site, toning down written promises, removing seminar videos and inserting disclosures on each PowerPoint slide he had posted.
“Oftentimes there’s a compliant way to get to where they want to go. It’s just not the way they went,” she said.
The details are important because an adviser’s website is often a regulator’s introduction to the firm, said Amy Lynch, founder of Rockville, Maryland-based FrontLine Compliance.
“You could have an SEC examiner looking at your website right now,” she said.
Regulatory experts suggest a few basic questions that advisers can raise with their compliance departments to help make sure a website includes the proper controls to keep regulators happy:
1. Is there a boilerplate disclosure at the bottom of every page of the site?
This must include details such as a firm’s name, the regulatory bodies it registers with, states in which advisers can or cannot work, and contact information. Nuances can vary, depending on whether the adviser registers with the U.S. Securities and Exchange Commission or states, or is a broker licensed by the Financial Industry Regulatory Authority (FINRA), said Vasilev, the compliance expert.
2. Are there disclaimers about information that comes from outside sources?
Advisers’ websites should make clear when certain information, such as blog posts or news stories, was not written in-house. Point out that outside information may not be accurate, nor is it necessarily endorsed by the firm. Remember, the disclaimer does not release advisers and firms from the obligation to review those details.
3. Does performance information include proper disclosures?
Advisers who advertise the performance of portfolios they manage should show figures that are calculated after subtracting all fees, said Lynch, the compliance consultant. The disclosure may describe the steps used to calculate returns. It should state that past performance does not indicate future results.
4. Do you have regularly scheduled compliance checks of your website?
An adviser’s compliance department should check the site at least quarterly to make sure the information is still accurate.
There are many other rules a compliance officer should know about. They include disclaimers for professional designations, types of labels advisers use to convey a certain expertise. Consider hiring a compliance consultant to double check your compliance officer’s work. (Reporting by Jennifer Cummings; Additional reporting by Jason Wallace; Editing by Suzanne Barlyn and Andrew Hay)