July 18 (Reuters) - Self-promotion through efforts such as writing “how-to-invest” books and hosting radio shows can help financial advisers drum up business - unless the wrong people notice.
That is what happened after Salt Lake City broker and wealth manager Bruce Lefavi promoted himself as a financial guru. His multimedia blitz included a syndicated radio show, “Bulletproof Your Financial Future,” as well as a book, billboards and a Facebook page.
But the Financial Industry Regulatory Authority also took note of Lefavi’s media presence.
The industry-funded watchdog found that each of his efforts in some way violated rules for communicating with the public, according to a settlement reached on July 7. Among the problems: Lefavi’s communications included “exaggerated, unwarranted and/or misleading claims,” FINRA said.
FINRA suspended Lefavi for 10 days. It also fined him and his namesake brokerage firm a total of $75,000. Lefavi, who agreed to the terms, neither admitted nor denied FINRA’s findings. His lawyer declined to comment.
The case highlights the risks of regulatory scrutiny that advisers take on when promoting themselves through a growing and vast array of media choices, said Linda Riefberg, a securities lawyer for Cozen O‘Connor in New York.
“No matter how the advertising is presented, FINRA wants to make sure it’s fair, balanced and not misleading,” said Riefberg, former chief counsel of FINRA’s enforcement unit.
Nearly half of the 13-page settlement addresses violations involving Lefavi’s radio show. For example, Lefavi invited listeners to call in, but the calls were actually staged, FINRA said. He also promoted the show as being live when it was prerecorded.
Some of the shows, which aired between 2010 and 2013, promoted the benefits of investing in privately issued securities without explaining how risky they are, FINRA said.
But that was not all. Lefavi’s book, “Bulletproof Retirement,” violated a U.S. Securities and Exchange Commission rule by including details about the returns of specific mutual funds without making required disclosures, FINRA said. Advisers, for example, must explain that past performance does not guarantee future results.
Lefavi’s Facebook page violated industry rules because it had not been put through a type of approval process that FINRA requires firms to follow.
Moreover, the firm’s billboards and a series of “Bruce’s Best” tipsheets for clients included misleading statements, FINRA said, although the nature of them is unclear. One tipsheet, however, did not include all the details clients needed to accurately compare investments.
FINRA’s sanction may not be the end of Lefavi’s problems, said Amy Lynch, president of FrontLine Compliance LLC in Rockville, Maryland.
His other firm, Lefavi Wealth Management, is also a type of adviser that must register with the U.S. Securities and Exchange Commission, which can file a separate enforcement case in addition to FINRA‘s, Lynch said. “I’d put money on that.”
An SEC spokeswoman declined to comment. (Reporting by Suzanne Barlyn; Editing by Lisa Von Ahn)