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

Related Articles
  1. Investing

    12 Things You Need To Know About Financial Statements

    Discover how to keep score of companies to increase your chances of choosing a winner.
  2. Investing

    Explaining Financial Statement Analysis

    Financial statement analysis is the process of reviewing a company’s statements to gain an understanding of its financial health.
  3. Financial Advisor

    Don't Be Misled By Investment Advertising

    Investment companies and brokers want to sell. Unfortunately, this can result in promotional material that is not entirely frank, or far worse, truly misleading.
  4. Investing

    What are Financial Statement Assertions?

    Understand financial statement assertions and what they mean in accounting. For investors, it is important that assertions be accurate.
  5. Investing

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  6. Financial Advisor

    On The Record: Communications With The Public

    NASD Rule 2211 can make or break your career as a registered principal.
  7. Investing

    Find Investment Quality In The Income Statement

    Use these key attributes to uncover top-level investments.
  8. Investing

    Look For These Red Flags In The Income Statement

    Companies can overstate their revenues and understate their losses to boost investor confidence. Learn how to spot the these red flags in income statements.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center