What are the most common regulatory errors that firms make when they are advertising products and services? Compliance officers at financial firms might find this short checklist useful.

These examples are based on the US Securities and Exchange Commission's objections to the most frequent transgressions that firms make against Rule 206(4)-1 (known as the “Advertising Rule”) of the Investment Advisors Act 1940, but are of near-universal application.

● Misleading performance results. Some ads contain misleading performance results, often presenting them without deducting advisory fees and also comparing them with some benchmark or other without saying anything about the pitfalls inherent in the comparison, of which there are often many. Some ads do not say that the strategies they are advertising differ somewhat from the composition of the benchmarks against which they are measuring them. Ads that promote advisors often contain hypothetical and back-tested performance results without explaining where these returns came from and without including other potentially important information about those results.

● Lying at face-to-face meetings. Rather amusingly, the Americans refer to these occurrences as "misleading one-on-one presentations." In the US these meetings are subject to the Advertising Rule along with everything else. The SEC talks about recalcitrant advisors 'advertising' (bragging about) performance results at certain meetings without deducting advisory fees and other expenses from the figures they are extolling. Firms usually only hold such meetings with HNW clients, pension funds or corporates with some resources.

● Misleading claims about compliance with voluntary performance standards. These appear in written ads. Some advisors claim that their advertised performance results comply with such standards without backing their claims up there and then - something the SEC (along with regulators in other countries) does not like.

● Cherry-picked profitable stock selections. Some advisors include only their most profitable past stock selections or recommendations in presentations, in newsletters for clients, or on their websites. The Advertising Rule only allows ads that set out lists of all recommendations that the relevant investment advisors (IAs) made in the last year or more, with each recommended security being named along with the results. This gives the reader some perspective.

● Breaking agreements with the regulator. In the US, the SEC issues so-called 'no-action letters,' a practice that is not allowed in the UK. Nevertheless, regulators frown on any firms that abuse any latitude they give them, in whatever form. Such abuse seems to be surprisingly widespread. A European example might take in firms that run over the amount of latitude that the Financial Conduct Authority is allowing them over the implementation of MiFID II, the second Markets in Financial Instruments Directive. Everybody knows that most firms will not be entirely ready for the deadline on 3rd January, but not many months will pass before the regulator becomes short-tempered with stragglers.

● Bad compliance policies and procedures. These are all too common. The SEC is encountering bad processes for the review and approval of advertising materials before they are disseminated; and for confirming the accuracy of performance results that are to be advertised.