MMA athlete endorsements lead $523M RIA to lose fight with SEC

A registered investment advisor in New York has settled charges with the Securities and Exchange Commission relating to the use of endorsements from professional athletes in its advertising.

The SEC says that Wahed Invest, Inc. used advertisements across social media and its own website and email featuring MMA fighters and other athletes without including the disclosures necessary to comply with the SEC’s Marketing Rule stating that these were paid endorsements from people who were not current clients of the firm. The advertising ran for more than 18 months.

The athletes were said to have been paid $30,000-$35,000 a month for their appearances alongside marketing messages such as “Step into the ring of financial success with Wahed in 2023.” Stars appearing included former UFC lightweight champion Khabib Nurmagomedov who joined Wahed as an investor and brand ambassador in 2021 following his retirement from the sport.

The SEC order also found that hypothetical returns were included in advertising for more than 17 months.

Wahed did not admit or deny the order's findings but consented to a cease-and-desist order, a censure, to comply with undertakings not to advertise hypothetical performance without having the requisite policies and procedures and to ensure its advertisements comply with the Marketing Rule, along with a civil penalty of $250,000.

It’s not the first time Wahed has caught the attention of the SEC. In 2022 it was charged with making misleading statements and breaching its fiduciary duty, as well as for compliance failures related to its Shariah advisory business.

Wahed's mission to provide Sharia-compliant investment options makes endorsements from high-profile figures who adhere to Islamic values particularly meaningful to Wahed's core audience.

But the firm’s advertising has proved controversial outside the US too with a recent concern raised with the Mayor of London, England, about a subway poster featuring a Muslim cleric, although it was deemed to be compliant.