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By Emily Matyas Outreach

Are You Making these Common Compliance Mistakes?

6 minute read

All too often financial advisors leave themselves vulnerable to lawsuits and regulatory action because they neglect to follow website, social media, and blog compliance standards. The U.S. Securities and Exchange Commission (SEC) mandates that advisors follow the Investment Advisers Act of 1940 and its recent amendments, including the new SEC rule on disclosing social media accounts on Form ADV. To avoid these legal hassles, review your website to ensure you are not making these five common compliance mistakes.

1. Your site does not have a disclosure at the bottom of every page.

Including a disclosure message at the bottom of every page is essential to preserving your firm’s integrity. Your disclosure must include details such as a firm’s name, the regulatory bodies it registers with, states in which advisors can or cannot work, and contact information. Nuances can vary, depending on whether you are registered with the SEC or states, or if you are a broker licensed by the Financial Industry Regulatory Authority (FINRA). Accurately conveying disclosure issues confirms to your clients that your firm is operating with the best intentions.

Below is a sample disclosure statement:

example website disclosure for financial advisor
Example of a website disclosure for financial advisors

2. Not having disclaimers about information that comes from outside sources.

Advisors’ websites should make it apparent when blog posts, news stories, or other information were not written by a professional at the firm. Disclaimers are beneficial to incorporate on your website because it protects your firm from any miscommunication that your firm endorses the content provided. Disclaimers do not exempt advisor firms from the responsibility of ensuring the truthfulness of information disclosed.

Fact checking is a must. Make sure you point out to your clients whenever you share information from third party sources (you may even want to include that you are not responsible for inaccurate information from third-party sources). Additionally, you should avoid vague and technical language in order to make disclaimers easy to interpret.

 

3. Including information about past performance, but failing to include a disclosure for that performance information.

Choosing to share the success of your past performance can offer your firm a great advantage over competing advisors. But when promoting performance portfolios you should validate your management by providing figures that were calculated after the subtraction of fees. You can utilize a disclaimer to demonstrate the steps taken to determine returns. Remember to always include that “past performance does not indicate future results” in order to avoid any legal ramifications.

 

4. Not having regularly scheduled compliance checks of your website/blog

It is recommended that financial advisors schedule a compliance check conducted by its compliance department every quarter of the fiscal year. On top of that, it’s wise to hire a compliance consultant to verify the accuracy of your internal compliance officer’s work. Rules and regulations are constantly changing and your officer may not be aware of new disclaimers. It’s important that your firm implement this safety check to avoid being reprimanded by the SEC with hefty fines.

If you are part of a broker-dealer or independent producer group, be sure to work with a website provider that can offer an enterprise-level tool that allows your compliance officer to easily communicate with you and provide oversight on your website, blog and overall digital marketing.

 

5. Not archiving your site and all changes made to it.

All additions, edits and changes to your website (including the posting of new content) need to be archived for compliance purposes.  If you undergo a compliance audit, you’ll want to be sure to have well-organized records that are accessible immediately. At Twenty Over Ten for instance, we automatically archive every change and iteration of your website that is made in our system and provide advisors with a date-stamped PDF and a versioned site for access at any time through your account.

Compliance archiving for financial advisors
From Twenty Over Ten’s website homepage: In addition to all other features, we also automatically archive all changes made to each website with a date-stamped PDF and a versioned site for access at anytime. Additional tools available for Broker-Dealers.

If you are interested in learning more about compliance regulations for financial investment advisors visit FINRA.org or SEC.gov.


 

You might also like: Your website is awful and it’s a problem and Five Little Things: Email Marketing for Advisors 101 Edition 

 

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