Advertising in any form can be highly problematic for an investment adviser, even if such adviser is not required to be registered. The mere mention of an investment fund to a potential investor could be seen as an advertisement and may create liabilities that an investment adviser is unprepared to face. 

 

The United States Securities and Exchange Commission (SEC) defines “advertisement” as “any communication, disseminated by any means, by or on behalf of an investment adviser, that offers or promotes the investment adviser’s investment advisory services.”  

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The SEC's position on advertising is organized as follows, as a means reasonably designed to prohibit fraudulent, deceptive or manipulative acts:

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1. general prohibitions of certain advertising practices applicable to all advertisements;

2. tailored restrictions or conditions on certain practices (testimonials, endorsements, and third-party ratings) applicable to all advertisements;

3. tailored requirements for the presentation of performance results, based on the advertisement’s intended audience; and

4. a compliance requirement that most advertisements be reviewed and approved in writing by a designated employee before dissemination.

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Any communication that an investment adviser plans to use to gain the attention of potential investors should be reviewed by competent legal counsel.