Inflated Credentials – A Growing Problem Among Financial Advisers


Investors beware – advisers who make up or inflate their credentials are committing fraud upon their clients. This is often the first step leading to the devastating losses to investors we read about almost every day. Overburdened and underfunded though they are, the SEC announced that it will take action to combat this growing problem.

ADV forms filed with the SEC and provided to clients sometimes contain misinformation about an adviser’s education, business background, disciplinary disclosures and credentials. In the past, the SEC took them at face value, but will not do so anymore (“SEC targets advisers who inflate credentials,” by Dan Jamieson, InvestmentNews).

For example, the SEC will reportedly run commercial background checks on individuals, as well as internet searches, and compare the results with an adviser’s claims. If an adviser claims to have graduated at the top of the class, the SEC will check. In addition, SEC examiners will cross-check adviser claims against information listed on required SEC filings like Form U-4s and ADVs.

This cross-checking may also reveal outside business activities that sometimes signal potential supervisory issues between the firm and the adviser that can adversely impact investors. Outside business activities can be red flags for “selling away,” a practice in which an adviser may sell unsuitable and fraudulent investments on the side, away from scrutiny by the firm’s supervisory system.

Investors should not count solely on the SEC, however, and should do their own background checks using FINRA’s BrokerCheck and by contacting their state securities regulators. Contact information can be obtained at

Page Perry is an Atlanta-based law firm with over 170 years of collective experience maintaining integrity in the investment markets and protecting investor rights.