SEC Settles Charges with Pacific Financial Group for Violations of the Marketing Rule

The U.S. Securities and Exchange Commission (SEC) has reached a settlement with The Pacific Financial Group, Inc., a registered investment adviser based in Bellevue, Washington, over violations of the Marketing Rule, according to the regulator's press release on Friday.

This rule, which was amended and became effective on November 4, 2022, mandates that investment advisers must implement policies and procedures to ensure that any hypothetical performance used in advertisements is relevant to the intended audience's financial situation and investment objectives.

The SEC's investigation revealed that Pacific Financial advertised hypothetical performance data for 23 different portfolios on its website from November 4, 2022, to December 15, 2023. However, the firm's internal policies and procedures did not include provisions to identify the intended audience or ensure that the hypothetical performance was pertinent to the audience's financial needs.

As a result of these findings, the SEC determined that Pacific Financial willfully violated Section 206(4) of the Advisers Act and Rule 206(4)-1(d). Although the firm did not admit to or deny the SEC's findings, it has agreed to a cease-and-desist order, a censure, and a civil penalty of $430,000. Additionally, Pacific Financial must adopt and implement the necessary policies and procedures to prevent future violations of the Marketing Rule.