CSA scrutinize marketing practices of portfolio managers

July 6, 2011

The Canadian Securities Administrators released a staff notice yesterday summarizing findings from a focused compliance review of the marketing practices of firms registered as portfolio managers. The review, which looked at a representative sample of 56 portfolio managers, identified a number of deficiencies in the preparation, review and use of marketing materials, including with respect to the use of hypothetical performance data, exaggerated claims and the use of benchmarks. The notice also provides guidance with respect to suggested practices to address specific concerns.

Interestingly, the notice also includes a discussion of the use of social media for marketing purposes. While the CSA found that portfolio managers do not generally employ social media to currently market services, firms may be considering doing so. To that end, the CSA state that they expect firms and registered individuals to comply with regulatory requirements and legislation in using such websites. Thus, according to the notice, firms contemplating the use of social media should consider: (i) establishing policies and procedures for the review, supervision, retention and retrieval of materials on social media websites; (ii) designating an appropriate individual to be responsible for the supervision or approval of communications; and (iii) reviewing the adequacy of systems and programs to ensure compliant record retention and retrieval capability. 

For more information, see CSA Staff Notice 31-325.

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