SEC Adopts Modernized Marketing Rule for RIAs
The Securities and Exchange Commission has finalized reforms under the Investment Advisers Act to modernize rules that govern investment adviser advertisements and payments to solicitors.
The Securities and Exchange Commission has finalized reforms under the Investment Advisers Act to modernize rules that govern investment adviser advertisements and payments to solicitors. The amendments create a single rule that replaces the current advertising and cash solicitation rules.
“The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology,” said SEC chairman Jay Clayton. “This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors.”
The rule replaces the current advertising rules with provisions designed to accommodate the continual evolution and interplay of technology and advice and includes requirements for certain types of advertisements.
For example, the rule will require advisers to standardize certain parts of a performance presentation in order to help investors evaluate and compare investment opportunities and will include requirements for certain types of performance presentations.
Advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being misleading. The rule also will permit the use of testimonials and endorsements, which include traditional referral and solicitation activity, subject to certain conditions.
Finally, the SEC adopted related amendments to the investment adviser registration form and the books and records rule. The regulator also expects to withdraw no-action letters and other guidance addressing the application of the advertising and cash solicitation rules.
The marketing rule, amended books and records rule, and related Form ADV amendments, will be published on the SEC’s website and in the Federal Register. The amendments will be effective 60 days after publication in the Federal Register. The SEC has adopted a compliance date that is 18 months after the effective date to give advisers a transition period to comply with the amendments.
The SEC noted that while the rule reflects current best practices in marketing, it may result in practice changes for advisers, including private fund advisers. The regulator encourages advisers to actively engage with SEC staff as questions arise in planning for implementation. Questions can be sent via email to IM-Rules@sec.gov.
