A Washington-based RIA with $3.7 billion in assets under management will pay $430,000 to settle SEC charges that it violated the regulator's marketing rule by using hypothetical performance in ads.
Pacific Financial Group is located in Bellevue, Wash. and has been registered since 1983. according to the settlement order filed Friday. It markets itself as “The only multi-manager, multi-strategy Asset Management Platform (TAMP) designed specifically for the self-directed brokerage account and retirement plan market.” according to its website.
The SEC's updated advertising rule was passed in late 2020, with an effective date next May and a compliance deadline of the end of 2022. The rule defined how firms could use testimonials and endorsements in advertising and advertising metrics. performance that registrants could use in marketing materials, particularly limiting how they could use hypothetical performance.
According to the commission, Pacific Financial Group published advertisements on its website that included hypothetical performance consisting of performance “derived from model portfolios.” According to the order, these ads were “distributed to the general public rather than a specific audience.”
According to the SEC, the firm failed to implement procedures “reasonably designed” to ensure that the hypothetical ad performance was relevant to the “potential financial situation and investment objectives” of the target audience.
However, the commission noted that the firm appointed new leaders in March, with Chris Mills replacing Megan Meade as CEO and a new chief compliance and chief legal officer. The commission said the new leadership team looked into the alleged wrongdoing “and cooperated fully with staff,” according to the order.
Pacific Financial Group did not return a request for comment prior to publication.
In addition to the $430,000 penalty, Pacific Financial Group agreed to a censure. The firm also agreed to update its policies and procedures to catch errors of advertising rules and provide evidence to the SEC that it had done so (although it did not admit or deny the SEC's allegations).
The commission was decided first fees associated with advertising rules against a firm in August 2023, alleging that Titan Global Capital Management made misleading statements about its hypothetical performance metrics for its crypto strategy. Since then, the commission has settled with many other firms September AND APRIL.