SEC Targets Compliance with New Marketing Rule

The Securities and Exchange Commission announced that it will increasingly scrutinize compliance with its new Marketing Rule with a focus on testimonials and endorsements, third-party rating and Form ADV, the agency revealed in a newly released risk alert late last week.

In the alert, the SEC’s Division of Enforcement “encourages advisers to review their websites and other marketing materials for compliance with the Marketing Rule, including ensuring that they have a reasonable basis for believing they will be able to substantiate material statements of fact and that their performance advertising, including extracted performance and hypothetical performance, complies with the requirements of the Marketing Rule.”

On Sept. 19, 2022, the Division published a risk alert describing the initial areas of review related to examining advisers for compliance with the Marketing Rule. The SEC says that while the staff’s focus on these areas continues, they’re also increasing its focus on other Marketing Rule-related areas during examinations.

The staff previously announced they were reviewing the following:

• Policies and procedures, such as whether advisers have adopted and implemented written policies and procedures that are reasonably designed to prevent violations by the advisers and their supervised persons of the Advisers Act and the rules thereunder, including the Marketing Rule.
• Substantiation requirement, such as whether advisers have a reasonable basis for believing they will be able to substantiate material statements of fact in advertisements.
• Performance advertising requirements, including whether advisers are in compliance with performance advertising requirements in the Marketing Rule.
• Books and records, such as whether advisers are in compliance with Advisers Act Rule 204-2, as amended, that requires advisers to make and keep certain records, such as records of all advertisements they disseminate, including certain internal working papers, performance related information, and documentation for oral advertisements, testimonials, and endorsements.

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