Investment Firm Hit With $200k Fine By SEC Over Ads On KMBZ.

An investment firm that advertised on Entercom news/talk KMBZ-FM Kansas City (98.1) has been fined $200,000 by the SEC, which found that the ads contained prohibited client testimonials, failed to enforce the firm’s code of ethics and that the company, Creative Planning, Inc. (CPI), failed to keep true and accurate books and records.

The order said Creative Planning purchased live and recorded ads to be aired on KMBZ. Some of these commercials contained “client testimonials” from the host who voiced the spots, who was also a client of the firm, “praising his CPI wealth manager by name, and detailing his satisfaction with the advisory services he received from CPI.”

The SEC said, “although CPI’s policies and procedures required the firm to pre-approve and maintain copies of all of its advertisements, CPI did not monitor adequately the live and pre-recorded radio advertisements.” More than 250 live radio spots ran from August 2015-October 2017. The recorded testimonial spots began airing in March 2017, however CPI did not obtain a copy of that ad until October 2017.

“No one at CPI told the radio station or the radio host that they could not air testimonials in radio advertisements for CPI, and CPI did not listen to, monitor, or obtain copies of any of the live spots that the radio station aired for CPI,” the order states. “CPI did not listen to or obtain a copy of the March 2017 pre-recorded spot until the end of October 2017.”

Peter Mallouk, president of CPI, wrote about the company’s admitted mistake in a column for RIABiz. “The radio station never sent us recordings of the live reads, nor did we ever ask for them, and when they asked months later if we wanted to review them, we said no, assuming they were sticking with our pre-approved talking points. Big mistake,” he wrote.

Mallouk said the result of the experience had led to a new ad policy for the firm. “We are taking a straightforward solution to address this – no more live reads,” he said. “It’s simply impossible to know what a radio host may say at any given time; it’s unreasonable to expect them to remember extensive guidelines and given they occur ongoing, it’s nearly impossible to oversee, with much of the monitoring needing to happen after the fact.”

Entercom, the station and the host were not part of the SEC’s order and fine.

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