Compliance consultant Cathy Vasilev answered a call about a month ago from a financial advisor who asked her to review his sleek new website.
After a quick look, Vasilev urged him to immediately take it down. The site included claims such as, “Tired of losing money in the stock market? We can fix that.” It also featured videos of the advisor giving seminars, in which he discussed good stock picks he’d made. The site had almost no disclosures.
“He had proof on his website of all the non-compliant things he’d been doing,” said Vasilev, who co-founded Red Oak Compliance Solutions in Cedar Park, Texas.
Many advisors prioritize marketing over compliance on their websites, leaving them open to lawsuits from disgruntled clients and regulatory actions.
Vasilev helped the advisor revamp his site, toning down written promises, removing seminar videos and inserting disclosures on each PowerPoint slide he had posted.
“Oftentimes there’s a compliant way to get to where they want to go. It’s just not the way they went,” she said.
The details are important because an advisor's website is often a regulator's introduction to the firm, said Amy Lynch, founder of Rockville, Maryland-based FrontLine Compliance.
“You could have an SEC examiner looking at your website right now,” she said.
Regulatory experts suggest a few basic questions that advisors can raise with their compliance departments to help make sure a website includes the proper controls to keep regulators happy:
1. Is there a boilerplate disclosure at the bottom of every page of the site?