SEC Charges New York-Based Registered Investment Adviser with Marketing Rule Violations

ADMINISTRATIVE PROCEEDING
File No. 3-22283

November 1, 2024 - The Securities and Exchange Commission today announced settled charges against Wahed Invest, LLC ("Wahed"), a registered investment adviser based in New York, New York, for violating the Marketing Rule. The order finds that Wahed disseminated advertisements containing paid endorsements from professional athletes that lacked required disclosures and advertised hypothetical performance to the general public on its website without adopting and implementing required policies and procedures.

Registered investment advisers are prohibited from including any endorsement in an advertisement unless, among other things, the investment adviser clearly and prominently discloses that the endorsement was given by a person other than a current client or investor, that compensation was provided, and a brief statement of any material conflicts of interest. In addition, the material terms of any compensation arrangement must also be disclosed. The SEC's order finds that for more than 18 months, Wahed disseminated advertisements via its website, social media, and email that included endorsements from compensated professional athletes, including one with an ownership interest in Wahed's parent company. The advertisements failed to include the required disclosures, according to the order.

Registered investment advisers are also prohibited from including hypothetical performance in their advertisements unless they have adopted and implemented policies and procedures reasonably designed to ensure the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience of the advertisement. The SEC's order finds that for more than 17 months, Wahed advertised hypothetical returns for several different strategies to mass audiences on its website without having the required policies and procedures.

The SEC's order finds that Wahed willfully violated the antifraud provisions of Section 206(4) of the Advisers Act and Rules 206(4)-1(b) and (d) thereunder. Without admitting or denying the order's findings, Wahed consented to a cease-and-desist order, a censure, to comply with undertakings not to advertise hypothetical performance without having the requisite policies and procedures and to ensure its advertisements comply with the Marketing Rule, and a civil penalty of $250,000.

The SEC's investigation was conducted by Jonathan T. Menitove and Brian A. Kudon and was supervised by Brianna Ripa, Andrew Dean, and Corey Schuster, all of the Enforcement Division's Asset Management Unit.