It is illegal for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce or of the mails, to use materially misleading sales literature in connection with the offer or sale of securities issued by an investment company. Under these provisions, sales literature is materially misleading if it: (1) contains an untrue statement of a material fact or (2) omits to state a material fact that is necessary to make a statement not misleading, in light of the circumstances of its use.
Whether or not a particular description, representation, illustration, or other statement involving a material fact is misleading depends on an evaluation of the context in which it is made. In considering whether a particular statement involving a material fact is or might be misleading, weight should be given to all pertinent factors, including, but not limited to, those listed below.
A statement could be misleading because of:
- Other statements being made in connection with the offer of sale or sale of the securities in question
- The absence of explanations, qualifications, limitations or other statements necessary or appropriate to make such statement not misleading
- General economic or financial conditions or circumstances
Representations about past or future investment performance could be misleading because of statements or omissions made involving a material fact, including situations where:
Portrayals of past income, gain or growth of assets convey an impression of the net investment results achieved by an actual or hypothetical investment that would not be justified under the circumstances, including portrayals that omit explanations, qualifications, limitations, or other statements that are necessary or appropriate to make the portrayals not misleading; and
Representations, whether explicit or implied, about future investment performance may be misleading, including:
- Representations of security of capital, possible future gains or income, or expenses associated with an investment;
- Representations implying that future gain or income may be inferred or predicted based on past investment performance; or
- Portrayals of past performance that are made in a manner that would imply that gains or income realized in the past will be repeated in the future.
A statement involving a material fact about the characteristics or attributes of an investment company could be misleading because of:
- Statements about possible benefits connected with or resulting from services to be provided or methods of operation which do not give equal prominence to discussion of any risks or limitations associated therewith;
- Exaggerated or unsubstantiated claims about management skill or techniques, characteristics of the investment company or an investment in securities issued by such company, services, security of investment or funds, effects of government supervision, or other attributes
- Unwarranted or incompletely explained comparisons to other investment vehicles or to indexes
Rule 482 - Advertising Requirements
InvestingDiscover how to keep score of companies to increase your chances of choosing a winner.
InvestingFinancial statements are a picture of a company’s financial health for a given period of time at a given point in time. The statements provide a collection of data about a company’s financial ...
Small BusinessConsolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
InvestingUnderstand financial statement assertions and what they mean in accounting. For investors, it is important that assertions be accurate.
InvestingA common size income statement expresses each account as a percentage of net sales.
InvestingThe SEC has taken steps to eliminate this type of corporate fraud, but it remains a real risk for investors.
InvestingFinancial statement manipulation is an ongoing problem, and investors who buy stocks or bonds should be aware of its signs and implications.
InvestingA company’s profit and loss statement, also called its income statement, summarizes its income and expenses for a quarter or year.
InvestingLearn how to trace where your tax dollars and charitable donations are going.