SEC Fines Firm $1M Over Marketing Rule Violations

SEC building in Washington

Wellesley Asset Management Inc. is a Massachusetts corporation with its principal place of business in Wellesley, Massachusetts.

As of March 2023, WAM reported approximately $2.4 billion of regulatory assets under management and invests on behalf of approximately 1,800 clients.

Most of WAM’s clients are individuals who invest in its convertible bond strategy; WAM also advises three registered mutual funds, two private funds, pensions, charities, insurance companies and corporations.

Sara Crovitz, partner at Stradley Ronon in Washington, said Monday in an email that the SEC’s action against Wellesley “is based on the old marketing rule. It’s interesting that the SEC is still bringing enforcement action under the old marketing rule, but it could be that the [SEC] staff’s investigation of this adviser began prior to adoption of the new marketing rule.”

The SEC said that in determining to accept the offer, it considered remedial acts promptly undertaken by WAM.

In March 2022, WAM voluntarily discontinued its use of the WAM Index in WAM’s advertisements, the SEC order states, and WAM is now in the process of terminating its contract with the WAM Index calculation agent so that the WAM Index will cease to exist.

Also, after discontinuing its use of the WAM Index in its advertisements, WAM retained outside legal and compliance professionals to conduct a review of its marketing materials and policies and procedures with respect to the Commission’s current Investment Adviser Marketing Rule that became effective on Nov. 4, 2022.

WAM has also engaged an outside compliance consultant to conduct a review of its current policies and procedures pertaining to, among other areas, performance advertising, including the use of hypothetical performance, speaking engagements with clients or prospective clients, including the use of scripts or talking points in connection with such engagements, and employee training related to compliance with the new Marketing Rule, the SEC order states.

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