NASAA Series 63Communication with Customers and ProspectsEasy
An investment adviser representative (IAR) publishes an article in a financial magazine discussing various investment strategies. The article includes a statement that 'Past performance is not indicative of future results.' Which of the following statements regarding this article, as an advertisement under the Uniform Securities Act (USA), is TRUE?
- AIt is not considered an advertisement because it is published in a third-party magazine.
- BIt is exempt from advertising rules if no specific securities are recommended.
- CIt is considered an advertisement and must comply with all relevant disclosure requirements.
- DIt falls under a safe harbor provision if the IAR pays for its placement.
Show answer & explanationAnswer & explanation
Correct answer: C. It is considered an advertisement and must comply with all relevant disclosure requirements.
Under the Uniform Securities Act, any communication that offers investment advisory services or promotes the IAR's or IA's services to more than one person is generally considered an advertisement. This includes articles published in magazines, regardless of whether specific securities are recommended, and must adhere to disclosure requirements.
Why the other options are wrong
- A. The publication medium does not automatically exclude it from being an advertisement if it promotes advisory services.
- B. The absence of specific security recommendations does not exempt it from being classified as an advertisement for advisory services.
- D. Paying for placement would reinforce, not exempt, its classification as an advertisement and subject it to even stricter scrutiny.
IA Advertisement Definition (USA)
Under the Uniform Securities Act, an advertisement generally includes any written communication offering investment advisory services or promoting the IA's/IAR's services to more than one person.
- Includes articles, newsletters, websites, and social media posts.
- Must comply with disclosure and anti-fraud provisions.
- Does not require specific security recommendations to be an advertisement.
Memory trick: An Advisor's Written Word is Always Watched.