Advertising Review Workshop (Advertising Track) Tuesday, May 24 3:00 p.m. 4:00 p.m.

Transcription

1 Advertising Review Workshop (Advertising Track) Tuesday, May 24 3:00 p.m. 4:00 p.m. Learn to apply the adverting rules during this highly interactive and dynamic session. Senior staff from FINRA's Advertising Regulation Department will lead this hands-on workshop about how to stay in compliance when communicating with the public. Attendees will first work in small groups to review mock advertisements and then present their findings. In turn, the moderators will share the regulatory perspective, clarify misperceptions, and answer questions. Moderator: Anthony Maher Manager FINRA Advertising Regulation Panelists: Derek Ashworth Manager FINRA Advertising Regulation Kimberly Flanders Principal Investigator FINRA Advertising Regulation Lynn Lawson Associate Manager FINRA Advertising Regulation 2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

2 Advertising Review Workshop (Advertising Track) Panel Bios: Moderator: Anthony T. Maher is a manager in FINRA s Advertising Regulation Department. He served in the same role at NASD before its 2007 consolidation with NYSE Member Regulation, which resulted in the formation of FINRA. His chief responsibility is managing staff members dedicated to the routine review of member advertisements. Mr. Maher also speaks at FINRA conferences, especially the department s annual Advertising Regulation Conference, where he conducts a highly interactive educational handson advertising review workshop. Prior to joining FINRA in 1995, he was a registered principal and a compliance analyst for a broker-dealer subsidiary of a life insurance company. Mr. Maher holds a J.D. from George Mason University School of Law, a master s degree from Georgetown University and a bachelor s degree from George Mason University. Panelists: Derek Ashworth is a manager in FINRA s Advertising Regulation Department. Previously, he was an associate manager and analyst in the Department, serving in similar roles at NASD before its 2007 consolidation with NYSE Member Regulation, which resulted in the formation of FINRA. Prior to joining NASD, Derek was a program manager for a business and education partnership at Nova Southeastern University in Fort Lauderdale, FL. Previous to this role, he was a specialty banker and registered representative with First Union in West Palm Beach, FL. Mr. Ashworth received his bachelor s degree from Stetson University and completed his M.B.A. at Johns Hopkins University. Kimberly Flanders is Principal Investigator in FINRA s Advertising Regulation Department. She has served in this role since 2002 and joined the Department in Prior to joining FINRA, Ms. Flanders was an investigator for the Resolution Trust Company in Washington, DC. Previous to this role, she was a staff member of the Permanent Subcommittee on Investigations, chaired by the former U.S. Senator from Georgia, Sam Nunn. Ms. Flanders received her bachelor s degree from the University of Georgia. Lynn Lawson is an associate manager in FINRA s Advertising Regulation Department. Her primary responsibilities include training and mentoring assigned staff and conducting reviews of complex communications for compliance with applicable advertising rules. She is also the department s Training Committee Coordinator and has been a speaker at FINRA s Advertising Regulation Department annual conference since Prior to joining FINRA, she worked as a contract attorney and in the financial services industry. She holds Series 7, 24 and 63 registrations. Ms. Lawson is also a graduate from The Catholic University of America, Columbus School of Law and earned a bachelor s degree in English from Spelman College. She is also holds the designation of a Certified Regulatory and Compliance Professional (CRCP ) from the FINRA Institute at Wharton and is a member of the District of Columbia Bar Financial Industry Regulatory Authority, Inc. All rights reserved. 2

3 FINRA Annual Conference May 23 25, 2016 Washington, DC Advertising Review Workshop

4 Panelists Moderator Anthony Maher, Manager, FINRA Advertising Regulation Panelists Derek Ashworth, Manager, FINRA Advertising Regulation Kimberly Flanders, Principal Investigator, FINRA Advertising Regulation Lynn Lawson, Associate Manager, FINRA Advertising Regulation FINRA Annual Conference 2016 FINRA. All rights reserved. 1

5 Wise Investors Fund Magazine Ad FINRA Annual Conference 2016 FINRA. All rights reserved. 2

6 Social Media ConnectOn FINRA Annual Conference 2016 FINRA. All rights reserved. 3

7 Seminar Invitation FINRA Annual Conference 2016 FINRA. All rights reserved. 4

8 Social Media Chirper FINRA Annual Conference 2016 FINRA. All rights reserved. 5

9 Aesop Advisors Newspaper Advertisement FINRA Annual Conference 2016 FINRA. All rights reserved. 6

10 Communication #1: Wise Investment Funds Magazine Ad

11 WISE INVESTORS DISCOVER OPPORTUNITIES and RECOGNIZE RISK EXPERIENCE MANAGING RISK WISE INVESTORS HAVE A UNIQUE PERSPECTIVE In this uncertain investment climate, it s essential to have WISE advice to spot opportunities and keep a close eye on risk. With over 50 years experience in investing and navigating turbulent markets all over the globe, WISE INVESTORS has honed its knowledge and become a trusted leader in investment management. Contact your financial advisor or visit us at wiseinvestmentfunds.com We consistently achieve superior performance because we are patient, disciplined and scrutinize potential investments. We also study geo-political situations and understand how they may affect our investment strategies. We take calculated risks and remain vigilant for the right opportunities. Gain from our Wisdom and come grow with us. WISE INVESTMENT ADVISORS, LLC Member SIPC Call your financial advisor for more information. Investors should consider the investment objectives, risks and charges of the Wise Funds. This and other important information is in the prospectus, which investors should read carefully before investing. Wise Investment Funds Distributors, Inc.

12 Additional Information Source of Material: Magazine advertisement filed with Advertising Regulation Department April 1, 2016 Date of first use March 15, 2016 Registered principal approval April 1, 2013 Fund Information: An investment in the Wise Funds entails investment risks. Several Wise Funds are non-diversified and focus on global and emerging markets, small-cap and high yield securities 5.75% front-end load for each fund; also management fees and expenses Recent performance for the Wise Funds, in general, has lagged the various market indices that are the benchmarks for its funds Firm Information: Firm commenced operations in 1983, and its portfolio managers have been in the industry for more than 35 years Wise Investment Funds Distributors, Inc., member FINRA and SIPC, is the Funds distributor Securities products and services offered by Wise Funds Distributors, Inc. Wise Investment Advisors LLC is a Registered Investment Advisor

13 Communication #2: Social Media - ConnectOn

14 Home Profile Friends Career What is ConnectOn? Join Today Sign In 2 Nickleby Financial Services, Inc. Financial Planning Investment Services employees 13,008 connections Following 1,025 people viewed your profile in the last 90 days 13,008 followers About Us Founded in 1987, Nickleby Financial Services LLC offers full service brokerage and financial planning services. Nickleby provides financial planning for college, retirement and legacy. Unlike many financial planning firms, we utilize alternative investment products to further diversify our client capital to maximize potential returns and minimize the risk of loss. We also offer a full suite of brokerage services. Website Industry Type Financial Planning and Investment Services Public See more Recent Posts Nickleby Robo-Advisors? Who will you call when you are concerned with significant market fluctuations? Who will put your investments and the market into perspective? A robot? We don t think so either. We always answer our phones and provide you with excellent advice and service. Careers Interested in jobs at Nickleby? 8 jobs posted Employees See Jobs > See connections > Like. Comment. Nickleby Share. 21 hours ago We are there when you need us when you need to talk to someone. Nicholas Nickleby, founder and CEO of Nickleby Financial Services, Inc. Ads you may like $1.99 News & Stock Magazine Click to subscribe Like (4). Comment. Share. 2 days ago Nickleby We work with individuals to create tax-advantaged, wealth building and asset protection plans. Do you know that there is a way to save for retirement tax-free, but yet retain access to your money for whatever reason you choose penalty free? Like (2). Comment. Share. 4 days ago Nickleby Turning retirement savings into retirement income. Annuities offer guaranteed income and growth without risk of losing your money. Like (4). Comment. Share. 6 days ago About Contact Us Privacy & Terms ConnectOn Inc. 2016

15 Additional Information Source of Material: Newly redesigned social media page Obtained during a sweep focused on social media About Us Section: Became available to the public on March 1, 2016 Not approved by a registered principal of the firm Not filed with the Advertising Regulation Department Recent Posts: Not approved by a registered principal of the firm Not filed with the Advertising Regulation Department Appear in the interactive portion of the homepage Other Information: Annuities referred to in the fourth post are Variable and Indexed Annuities o Highly complex insurance products o High commissions with lengthy surrender charge period o Guarantees are based on the financial strength and claims paying ability of the insurer

16 Communication #3: Seminar Invitation

17 Searching for dependable sources of income in today s uncertain interest rate environment is challenging. We offer our investors seeking income a new investment opportunity to enhance their portfolios. During this educational seminar, we will explore how the Windmill Development Fund II can: Diversify your portfolio Provide an alternate source of income Deliver potentially higher income Position investors for the rise in interest rates Offer investors exclusive access to investments in private companies Protect against interest rate risk Provide quarterly distributions Windmill Development Fund II allows investors to invest in middle-market private American companies at low investment minimums. The Fund seeks to generate income and to a lesser extent, capital appreciation. The Fund is intended for investors seeking higher relative income and fixed income diversification. The Fund combines the capital of many investors to own debt or finance middle-market businesses that one day will grow to be large successful companies. In turn, the companies make payments to the Fund. Because the Fund must distribute at 90% of its taxable income, investors will enjoy a steady stream of distributions. When: June 15, :00 p.m. Join us for a complimentary dinner at 7 p.m. on May 26, 2016 at Quixote s Restaurant in downtown La Mancha. Your host and featured speaker will be Miguel Cervantes, manager of the Windmill Development Fund II. Mr. Cervantes will discuss how the Fund can potentially provide higher income with lower inflation risk than other traditional fixed income investments. Where: Quixote s Restaurant in downtown La Mancha Register: Please contact Dulcinea del Toboso at Risk information: The Windmill Development Fund II is comprised mostly of floating rate senior secured loans. These loans are senior to other loans and historically enjoy a much lower rate of default. However, the companies paying the notes may be highly leveraged. The loans purchased by the Fund may have lower credit ratings or no rating, which increases the Fund s exposure to credit risk. Diversification does not ensure a profit or protect against a loss. Past performance is no guarantee of future performance. Securities Offered Through Windmill Investors LLC Member FINRA SIPC

18 Additional Information Filing information: Seminar invitation filed with Advertising Regulation on May 5, 2016 Registered principal approval: May 5, 2016 Date of intended first use: May 25, 2016 Windmill Development Fund II Information: The Fund is a non-traded business development company registered as a closed-end fund under the Securities Act of 1933 and the Investment Company Act of 1940 Objective is to generate current income, and to a lesser extent, long-term capital appreciation Focus primarily on debt investments in a broad array of private U.S. middle-market companies with revenue between $ million at time of investment Invests primarily in floating rate senior debt Risk factors: o An investment in the Fund may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of investment capital o There is no guarantee the Fund will achieve its objective o An investment in the Fund may be illiquid o The Fund is not suitable if an investor needs access to his or her capital in the foreseeable future o The Fund will not be traded on an Exchange and there is no intended secondary market for the shares of the Fund o If an investor is able to sell shares, it is likely that the amount received will be less than original cost o An investment in the Fund is subject to significant fees, including an 8% front-end sales charge, ongoing expenses and advisor incentive fees on capital gains up to a maximum 10% o Distributions may be funded to a significant extent from a return of capital, offering proceeds and loans o Distributions are not guaranteed o The Fund will invest in securities that are rated below investment grade or are unrated

19 Communication #4: Social Media - Chirper

20 #tag Oliver Husband. Father. Little League Coach. Financial Advisor with Dodger Financial Investment Services, Inc. Comprehensive Financial Planning. 2,991 Chirps 52 Following 350 Followers Compose a new Chirp Chirps Oliver 2 weeks ago Hold the line. Stay the course. #EXWL is the best new weight loss drug on the market. Undervalued at $7. Oliver 3 weeks ago #EXWL is solid. Dickens do your due diligence. Your article is sloppy and filled with inaccuracies. Oliver 4 weeks ago Another idiotic article on #EXWL from someone named Dickens- who has no clue! There are safer weight loss drugs than #EXWL? Evidence? No! Facts? No! Oliver 4 weeks ago #EXWL continues to look good. Strong financials. Beginning to penetrate weight loss drug market. Future is bright. Oliver On vacation in the beautiful #VirginIslands. Will be back next week. 5 weeks ago Oliver Equities+bonds+annuities = solid planning. 5 weeks ago Oliver 5 weeks ago Watching over my stock picks. Looking good! Will help with retirement investing. Don t forget about allocating some assets to #annuities. No market risk-you can t lose money. #GuaranteedRetirementIncome 2016 Chirper About Help Careers Privacy Terms Advertisers Oliver 5 weeks ago Congrats to Bill and Mary-they are planning for a successful retirement. Income and peace of mind! Call me to create your plan also.

21 Additional Information Source of Material: Financial Advisor s personal Chirper page Obtained during a sweep focused on social media Page not reviewed or approved by a registered principal of the firm o Deemed a personal Chirper page Oliver Twist Information: Husband, Father, Little League Coach Financial Advisor with Dodger Financial and Investment Services, Inc. Full Service Brokerage and Financial Planning EXWL Information: EXWL is symbol for Extreme Weight Loss, Inc. EXWL s only product is a weight loss dietary supplement, which recently has come under scrutiny for serious adverse side effects EXWL s stock price has fallen to $7 from $14 in last three weeks Other Information: Oliver Twist owns 5,000 shares of EXWL Annuities Referred to in Chirps are variable and indexed annuities o Highly complex insurance products o High commissions with lengthy surrender charge period o Guarantees are based on financial strength and claims paying ability of the insurer

22 Communication #5: Aesop Advisors Newspaper Advertisement

23 Aesop Advisors Does Your Nest Have Any Golden Eggs? Today s financial markets make it difficult for investors to build a well-balanced portfolio. Increasing investment income is particularly difficult given the virtually non-existent interest from traditional products like CDs and Treasuries. On the other hand, many brokers offer highly complex products with tantalizing yields. At Aesop Advisors, we can help you navigate the market to increase your income and grow your portfolio. We listen and work closely with our clients to build their nests of golden eggs. We address client concerns and achieve their objectives through a strategy that minimizes risk, increases income and enhances overall portfolio return. Contact us for a free consultation so we can create a safe nest for your golden eggs. Androcles Lionel Financial Advisor Aesop Advisors 1 Fable Lane, City of Make Believe, CA Grimm Brothers Financial Services, Inc. Member

24 Additional Information Source of Material: The Firm: Submitted as a complaint to the Advertising Regulation Department by an anonymous complainant Grimm Brothers Financial Services, Inc., which offers all securities-related products and services, is a recently approved general broker/dealer (effective January 1, 2016) Grimm Brothers and Aesop Advisors, a Registered Investment Advisor, are affiliated firms Grimm Brothers Financial Services, Inc. is a member of SIPC The firm s registered representatives regularly conduct securities related business at the address disclosed in the advertisement. The location is not an OSJ or registered branch office Androcles Lionel is a registered representative who holds the following registrations: Series 7, 24, 39, 53, 63 and 65 Products and Services Offered: Investors responding to the ad are offered a brief consultation that includes a short investor questionnaire/profile and discussion of the firm s investment philosophy and products and services including increasing income through investments in primarily senior secured loans, master limited partnerships, closed-end funds, income-oriented mutual funds, municipal securities and U.S. Government bonds

25 Advertising Review Workshop Answers for Hands-on Sample Communications

26 Communication #1: Wise Investment Funds Magazine Ad Main concerns: Procedural concerns: Registered principal approval after date of first use Advertisement filed late (more than 10 business days past the date of first use) Omission of material information: o Failure to disclose that past performance is no guarantee of future results Exaggerated, unwarranted or misleading statements and claims: Other: Because Wise has not been in existence for 50 years, the claim of more than 50 years of experience is misleading Because the Wise funds have lagged their benchmark indices, the claim of consistent superior performance is exaggerated and misleading Reference to trusted leader is unwarranted as no basis is provided Wise Investment Advisors LLC is not a member SIPC (it is a Registered Investment Advisor) 2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 2

27 Communication #2: Social Media - ConnectOn Main concerns: Procedural: Failure to obtain Registered Principal approval for the About Us section prior to use Omission of material information: The claim, there is a way to save for retirement tax-free, but yet retain access to your money penalty free fails to identify the strategy and/or product that would provide such tax advantages and appears misleading as no basis is provided Exaggerated, unwarranted, promissory or misleading statements: The reference to saving for retirement tax-free appears inaccurate as most retirement saving vehicles offer tax deferral rather than freedom from taxes Statement that Unlike many financial planning firms, we utilize alternative investment products to maximize potential returns and minimize the risk of loss is unwarranted given the risks of investing in many alternative investments As the annuities referred in the fourth post relate to variable and indexed annuities, the claim that an investor cannot lose money is unwarranted 2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 3

28 Communication #3: Seminar Invitation Main concerns: Omissions of material information: Fails to disclose that the Windmill Development Fund II is a business development company. Merely referring to the Fund may give investors the impression that the Windmill Development Fund II is a mutual fund Insufficient risk disclosure as to the: o Speculative nature of an investment in the Fund; o Lack of liquidity; no secondary market; o Fact that if investors are able to sell shares, it is likely that they will receive less than their original cost; o Significant fees and expenses of the Fund; and o Fact that the amount and timing of distributions may vary as they are not guaranteed. Exaggerated, unwarranted, promissory or misleading statements: The reference to the Fund as a traditional fixed income investment is misleading The statement that the middle-market companies whose debt is owned by the Fund will grow to be large successful companies is promissory as there is no guarantee these highly leveraged businesses will grow or even survive Statement that investors will enjoy a steady stream of distributions is unwarranted as distributions are not guaranteed Statement that the Fund can protect against interest rate risk is promissory and must be revised SEC Rule 482: Because the Windmill Development Fund II is registered as a closed-end fund under the Investment Company Act of 1940, the material should have included a prospectus offer using the language required by SEC Rule Financial Industry Regulatory Authority, Inc. All rights reserved. 4

29 Communication #4: Social Media - Chirper Main concerns: Omissions of material information: Fails to disclose: o That Oliver Twist holds a position in EXWL; o Recent developments concerning EXWL s adverse side effects; o The decrease in EXWL s share price; and o Products referred to in the seventh Chirp are variable and indexed annuities and that guarantees are based on claims paying ability of the insurer Risks of investing in a company with only one troubled product Exaggerated, unwarranted, misleading or promissory statements and claims: #EXWL is the best new weight loss drug on the market o The claim appears misleading in light of side effects recently revealed Dickens do your due diligence. Your article is sloppy and filled with inaccuracies and Another idiotic article on #EXWL from someone named Dickens - who has no clue! There are safer weight loss drugs than #EXWL? Evidence? No! Facts? No! o The claims are misleading in light of side effects recently revealed No market risk-you can t lose money. o Claims characterizing variable and indexed annuities in such a manner are misleading given that high commissions and early surrenders could result in loss of principal 2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 5

30 Communication #5: Aesop Advisors Newspaper Advertisement Main concerns: Omission of Material Information: Failure to disclose the risks associated with investing, including the potential loss of principal, especially with respect to products that may offer greater income Failure to qualify the statement increase your income and grow your portfolio with disclosure that there is no assurance that an investment objective will be achieved Failure to disclose which entity (Aesop Advisors or Grimm Brothers Financial Services) offers securities products and services Failure to disclose the relationship between the entities Failure to disclose Grimm Brothers Financial Services SIPC membership Exaggerated, Unwarranted, Promissory or Misleading Statements or Claims: The advertisement includes the following promissory statements: o increase your income and grow your portfolio ; o build their nests of golden eggs ; o achieve their objectives ; o increases income and enhance overall portfolio return ; and o can create a safe nest for your golden eggs Other Issues: Use of the FINRA logo is prohibited as it may imply endorsement by FINRA and may violate FINRA s trademark Unregistered business location included in advertisement may trigger a need to register that location and increase supervision there 2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 6