SEC Charges Investment Advisers and Representatives for Violating the Testimonial Rule Using Social Media and the Internet
July 10, 2018
File Nos. 3-18586; 3-18587; 3-18588; 3-18589; 3-18590
July 10, 2018 - The Securities and Exchange Commission today instituted five separate settled proceedings against two SEC-registered investment advisers, three investment adviser representatives, and a marketing consultant who committed and/or caused violations of the Testimonial Rule under the Investment Advisers Act of 1940 through their use of social media and the internet.
According to the SEC’s orders, registered investment advisers HBA Advisors, LLC and Romano Brothers & Company, investment adviser representatives Jaime Enrique Biel, William M. Greenfield and Brian S. Eyster, and marketing consultant Leonard S. Schwartz published testimonial advertisements on the internet in violation of the Testimonial Rule. The Rule prohibits registered investment advisers from publishing, circulating, or distributing any advertisement that refers to any testimonial concerning, among other things, the investment adviser. The SEC found that HBA, Biel, Greenfield and Eyster hired Schwartz and his company Create Your Fate, LLC to solicit testimonials from their clients and publish them on various public social media websites. In addition, the SEC found that Romano Brothers created and published two videos containing client testimonials on its public website and on YouTube.com. The published testimonials all contained information about the firms or representatives and the advice and services they rendered to their clients.
The SEC’s orders found that Romano Brothers and HBA each violated and that Biel, Greenfield, Eyster and Schwartz each caused violations of Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1) thereunder. Without admitting or denying the findings in the SEC’s orders, Romano Brothers, HBA, Biel, Greenfield, Eyster and Schwartz agreed to the entry of cease-and-desist orders and to pay civil penalties of $35,000 for Schwartz, $15,000 each for Romano Brothers and HBA, and $10,000 each for Biel, Greenfield and Eyster.
The SEC’s orders arise from examination referrals and additional research conducted by the SEC’s Chicago Regional Office. The examinations that led to the investigations were conducted by Bill Chiu, Stacey Gohl, Nathan Haselhorst, Alicia Tate, Emad Elsebaie, Erik Lillya and Kent McAllister. The investigations were conducted by Christine B. Jeon and Peter Senechalle and supervised by Anne C. McKinley.
See also Orders: