Investment Adviser and Its President Settle Charges for Testimonial Rule and Code of Ethics Violations
Sept. 18, 2018
File No. 3-18779
September 18, 2018 - The Securities and Exchange Commission today announced that Creative Planning, Inc. ("CPI"), an SEC-registered investment adviser in Overland Park, Kansas, has agreed to settle charges that it disseminated prohibited client testimonials and failed to enforce the firm's code of ethics. The firm's president and majority owner, Peter A. Mallouk, agreed to settle charges that he caused the firm's code of ethics violations.
According to the SEC's order, in August 2015, CPI hired a radio station to broadcast advertisements for the firm through two radio hosts in the Kansas City area. In January 2016, one of the radio hosts became a CPI client and began including testimonials of his experiences with CPI in his live radio spots. The live personal testimonials aired until October 2017. The radio station also aired a pre-recorded spot containing a client testimonial from March 2017 to October 2017. Although CPI's written policies required the firm to pre-approve and maintain copies of all of its advertisements, CPI failed to adequately monitor the live and pre-recorded radio spots and did not maintain copies of all of the advertisements. The order also found that
Mallouk failed to report to CPI's chief compliance officer the securities holdings and transactions from three brokerage accounts held for the benefit of his family, over which he exercised control, as required by the firm's code of ethics.
The SEC's order finds that CPI willfully violated the policies and procedures provisions of Sections 204A and 206(4) of the Investment Advisers Act of 1940 and Rules 204A-1 and 206(4)-7 thereunder, the books and records provisions of Section 204(a) of the Advisers Act and Rule 204-2(a)(11) thereunder, and the testimonials prohibition under Section 206(4) of the Advisers Act and Rule 206(4)-1(a)(1). The SEC's order finds that Mallouk caused CPI's Section 204A and Rule 204A-1 violations. Without admitting or denying the findings in the SEC's order, CPI consented to a cease-and-desist order, a censure, and a civil penalty of $200,000, and Mallouk consented to a cease-and-desist order and a civil penalty of $50,000.
The SEC's investigation was conducted by Som P. Dalal and Mary S. Brady of the Denver Regional Office. The case was supervised by Kurt L. Gottschall and litigation assistance was provided by Terry R. Miller and Gregory A. Kasper. The SEC examination that led to the investigation was conducted by Sabrina M. Silverstein, Danielle M. Thomas, Carolyn M. Werschler, Jason D. Morrison, and Nicholas F. Madsen.