The antifraud provisions of the Texas Securities Act prohibit an investment adviser from using any advertisement that contains any untrue statement of material fact or that is otherwise misleading. The prohibition would include any notice, circular, letter, or other written communication addressed to more than one person, or any notice or other announcement in any publication or by radio, television, Internet, the World Wide Web, or similar proprietary or common carrier electronic systems, that offers any service as an investment adviser.
  (1) Specifically, an advertisement of a registered investment adviser may not:
    (A) use or refer to testimonials (including any statement of a client's experience or endorsement);
    (B) refer to past, specific recommendations made by an investment adviser that were profitable, unless the advertisement sets out a list of all recommendations made by the investment adviser within the preceding period of not less than one year, and complies with paragraph (2) of this subsection;
    (C) represent that any graph, chart, formula, or other device can, in and of itself, be used to determine which securities to buy or sell, or when to buy or sell securities, or assist persons in making those decisions, unless the advertising prominently discloses the limitations thereof and the difficulties regarding its use; and
    (D) represent that any report, analysis, or other service will be provided without charge unless the report, analysis, or other service will be provided without any obligation whatsoever.
  (2) A registered investment adviser may advertise its past performance (both actual performance and hypothetical or model results) only if the advertisement discloses all material facts necessary to avoid any unwarranted inference. An investment adviser may not advertise its performance data if the advertisement:
    (A) fails to disclose the effect of material market or economic conditions on the results advertised;
    (B) fails to disclose whether and to what extent the advertised results reflect the reinvestment of dividends or other earnings;
    (C) suggests or makes claims about the potential for profit without disclosing the potential for loss; or
    (D) omits any of the facts material to the performance figures.
  (3) In addition, generally a registered investment adviser may not advertise gross performance data (i.e., performance data that does not reflect the deduction of various fees, commissions, and expenses that a client would pay) unless the investment adviser also includes net performance information in an equally prominent manner.

Source Note: The provisions of this §116.15 adopted to be effective August 12, 2001, 26 TexReg 5799; amended to be effective November 26, 2001, 26 TexReg 9582