SEC Adopts New Marketing Rule for Investment Adviser Advertising and Solicitation

January 12, 2021


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On December 22, 2020, the U.S. Securities and Exchange Commission (“SEC”) announced it has adopted amendments (also known as the “marketing rule”) to its rules under the Investment Advisers Act of 1940 (“Advisers Act”) that govern advertising and cash solicitation activities by investment advisers registered with the SEC. Unlike the proposed amendments, the SEC’s finalized marketing rule addresses both advertising and soliciting under a single rule. Click here to read the SEC’s final rule release for this new marketing rule for investment advisers.

What is the SEC’s new marketing rule?

The SEC’s new marketing rule will regulate marketing activities by investment advisers registered with the SEC, including advertising and SEC Securities and Exchange Commission (SEC) announcedSEC compliance outreach program's national seminarsolicitations. Previously, these activities were governed by separate rules (Rule 206(4)-1 and Rule 206(4)-3) which have been substantially unchanged since the 1970s. The SEC’s new marketing rule implements principles-based provisions which are intended to remain responsive to evolving practices in the investment adviser industry, such as electronic media and digital communications.

Which investment advisers are affected by the SEC’s marketing rule?

The amendments apply to all investment advisers registered, or required to be registered, with the SEC. The SEC’s marketing rule does not apply to exempt reporting advisers (“ERAs”) or others not required to register with the SEC. Furthermore, the new marketing rule does not apply to the marketing of registered investment companies or business development companies.  A state registered investment adviser should consult with its state securities regulators as to whether the state securities regulator will be following the SEC’s lead with respect to the new marketing rule.

When does the SEC’s final marketing rule go into effect?

The SEC’s new marketing rule will go into effect 60 days after publication in the Federal Register. The SEC has adopted an extended, eighteen-month transition period after the effective date to give registered investment advisers an opportunity to bring their practices into compliance with the new rule. During this transition period, the SEC is encouraging investment advisers planning their compliance programs to consult with SEC staff, if needed, with questions about the marketing rule. SEC staff can be reached by email at IM-Rules@sec.gov.

Why did the SEC adopt revisions to its current advertising and soliciting rules?

The SEC’s new marketing rule is intended to modernize the SEC’s regulation of investment adviser’s advertising and soliciting activities under the Advisers Act, in order to address evolving practices in the investment advisory industry while facilitating the flow of helpful, and not misleading, information to investors.

How do investment advisers registered with SEC comply with the new marketing rule?

Investment advisers registered with the SEC will need to make a number of adjustments depending on their business practices and the scope of their current marketing activities. At a minimum, registered investment advisers will need to update their compliance policies and procedures to address the new due diligence, oversight, and disclosure requirements for advertisements, as well as their policies and procedures related to solicitation, testimonials/endorsements, and recordkeeping. Due to the novelty and complexity of the new marketing rule, registered investment advisers should consult with experienced legal counsel and/or compliance professionals to ensure their activities are compliant with the SEC’s marketing rule.

What is the scope of the SEC’s new marketing rule?

For a deeper review of the SEC’s new marketing rule’s scope and requirements, view our SEC’s Marketing Rule Frequently Asked Questions or continue reading below.

Additional Resources

RIA Compliance Consultants will present two live webinar on January 28, 2021 at 12 pm CT and February 4, 2021 at 12:00 pm CT during which our Senior Compliance Consultants will discuss the SEC’s new marketing rule’s requirements and how they will affect investment advisers registered with the SEC. The January 28 session will focus on Advertising while the February 4 session will focus on Soliciting.

Click here to register for the January 28, 2021 session.

Click here to register for the February 4, 2021 session.

 

Posted by Grant Parr
Labels: Advertising, Marketing, SEC, Solicitors
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