SEC Overhauls Marketing Rules for Investment Advisers

On December 22, the SEC announced a major rule change that it hopes will clarify what investment advisers can and can’t do when it comes to marketing their services. Continue reading

On December 22, the SEC announced a major rule change that it hopes will clarify what investment advisers are permitted to do when it comes to marketing their services.

The SEC cited the need to adapt its rules to changing communications technology. “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 in announcing the overhaul.

The SEC’s current rules about advertisements and paying for client referrals will be consolidated into a single rule. Paying a third party to solicit new clients will now be considered a form of advertising, as will paid testimonials and endorsements and some one-on-one communications with clients.

Currently, each of these activities is subject to a separate set of requirements. By bringing them under the definition of advertising, the new rule replaces this complex system with a set of six broad principles that all forms of IA advertising must adhere to:

  1. No untrue statements or omissions of material facts
  2. No unsubstantiated statements
  3. No statements that imply something untrue or misleading
  4. When the benefits of the IA’s services are discussed, there must be a fair and balanced discussion of material risks
  5. “Anti-cherry picking”: the IA must present its track record in a fair and balanced way
  6. No advertisements that are otherwise materially misleading (intended as a “catch-all provision” for misleading advertising not covered above)

The rule change is expected to take effect sometime in the spring of 2021 and will affect the Series 65 and Series 66 exams.

Leave a Reply

Your email address will not be published. Required fields are marked *