Testable - Performance and Advertising Disclosures #3 Exam Post 2023.

Testable - Performance and Advertising Disclosures #3 Exam Post 2023.Rule 206(4)-1 Advertisements by investment advisers. - ANSWER Under the rule, an investment adviser is prohibited from publishing, circulating or distributing any advertisement that: A. Refers to any testimonials concerning any advice, analysis, report or service of the adviser; B. Refers to past specific recommendations of the adviser which were or would have been profitable to a person (excepting advertisements listing or offering to list all recommendations for at least one year together with certain required information and containing a required cautionary legend); C. Represents that any graphs, charts, or formula or device can, in and of themselves, be used to determine which securities to buy or sell or when to buy or sell them unless accompanied by explicit disclosure regarding the limitations and difficulties and risks inherent with their use; D. Represents that a report, analysis, or service will be provided free of charge unless it is in fact free and with no condition or obligation; or E. Contains any "untrue statement of a material fact" or that is "otherwise false or misleading." Advertising Overview - ANSWER Investment adviser advertising, including performance advertising, is principally regulated at the federal level under the general anti-fraud provision of the Investment Advisers Act of 1940 ("Advisers Act") Section 206 and Rule 206(4)-11 thereunder as well as applicable SEC no-action letters. Rules promulgated under Section 206(4) of the Advisers Act pertain to "advertisements" and apply to SEC registered advisers. The securities laws and rules of virtually all states regulate state investment adviser advertising pursuant to the framework articulated in Rule 206(4)-1 and applicable SEC no-action letters. Anti-Fraud Rule Provisions - ANSWER Sections 206(1) and (2) of the Advisers Act makes it unlawful for any investment adviser using the mails or interstate commerce "to employ any device, scheme or artifice to deceive, or manipulate any client or prospective client" or to "engage in any transaction, practice, or course of business which operates as a fraud or deceit upon any client or prospective client." These provisions apply to all investment advisers (as defined in Section 202(a)(11) of the Advisers Act) even if they are exempt from registration under Section 203(b) of the Advisers Act. A person can be found to have violated Section 206 even if the person engaged in the proscribed acts unintentionally. Rule 204-2 Books and Records to be maintained by Investment Advisers - ANSWER Rule 204-2 under the Advisers Act lists the types of books and records that investment advisers must make and keep true, accurate and current. The rule also specifies the