As discussed in yesterday’s post, Section 25302 of the California Corporations Code prohibits any person from publishing an advertisement after the Commissioner of the Department of Business Oversight has given notice to that person that she finds the advertisement contains a false or misleading statement or omits to make any statement necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading. The Commissioner, moreover, may give the notice summarily and without any prior hearing (although a hearing can be requested to have the notice rescinded).
The Commissioner has adopted Rule 260.302 setting forth the general standard for advertisements. One of these standards addresses the temptation (which is particularly strong amongst fraudsters) to advertise securities as “safe”:
An advertisement should not contain any statement or inference that an investment in the security is safe, or that continuation of earnings or dividends is assured, or that failure, loss, or default is impossible or unlikely.