Extraordinary anomalies were discovered by TINA during its reviews of Stansberry material. For example, close study of the testimonials and advertising claims, revealed that:
A 10-year-old child appeared to make more than $100,000 per year as a result of following a Stansberry & Associates newsletter's advice
Two different named people made exactly $15,460, two made $72,389, while three different named people made "over $13,000 in January"
Some testimonials were located in more than one place on Stansberry's website, but were attributed to different individuals
A Stansberry offer appeared to show customers to obtain "free silver" that was "not 'free' at all"
Truck drivers, office workers and even unemployed people appeared to be investing up to eight-figure sums in Stansberry recommendations
Such eye-popping anomalies, however, were not the meat of the TINA review. It cast its net much wider. The not-for-profit's central concern was that, taken as a whole, Stansberry & Associates' use of testimonials appeared to highlight purported customer experiences that - even if true - were misleading.
Stansberry strategy "deceit"
In a letter from TINA's Laura Smith, the complaint against Stansberry charges that the testimonials:
Omit material information, such as the "substantial risks associated with investing money" and the rate of return on investments realized by the endorsers
Do not appear to represent typical results, and/or "assume or require extremely large initial investment amounts"
Raise suspicion about their authenticity, as in the cases where identical testimonials are attributed to apparently different individuals
Contain false and misleading information, particularly in, for example, Stansberry & Associates' Retirement Millionaire newsletter
In response, Stansberry & Associates' lawyer Ms Fisher hit back, rebutting the claims and stressing that the company was not technically an investment adviser. This, she pointed out, meant that Stansberry's business did not fall within the (pre-World War II) regulatory regime for such advisers.
"First, it's important to note that Stansberry's publications and authors do not engage in personalized investment advice for subscribers. They are therefore exempted from the definition of investment adviser under the publisher's exemption of the Investment Adviser's Act of 1940..."
It seems, however, that Stansberry's business model may have long laboured under a misapprehension. Porter Stansberry has long stressed that he is not an investment advisor, but is rather a journalist, and hence is not subject to much of the rule book from the Securities and Exchange Commission. The SEC, for example, bans testimonials from promotions because these are inherently inclined to mislead.
But testimonials are regulated by the Federal Trade Commission, and this regulator's rule book is comprehensive. Under section 5 of the FTC Act, "endorsements and testimonials in advertising" is controlled - no doubt, much to Porter Stansberry's distaste. Under this section, endorsements "may not convey any express or implied representation that would be deceptive if made directly by the advertiser."
In other words, testimonials must be as true as anything else: and the publisher assumes liability for their content. Whether Porter Stansberry knew this is not clear from the paperwork, but here are a couple of clauses to make his heart sink.