On September 19, 2022, the Division of Examinations issued a Risk Alert informing federally-registered investment advisers that staff will conduct a number of specific national initiatives – as well as a broad review through the examination process – for compliance with the New Marketing Rule.
The rule, which was adopted on Dec. 22, 2020 and included a compliance deadline of Nov. 4, 2022, combines two existing SEC rules to more accurately regulate the kinds of marketing materials being used in today’s financial space.
“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 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 new rule provides for an extended compliance period intended to provide advisers with a sufficient transition period, including to enable consultation with the Commission’s expert staff.”
What to expect and how to prepare for the New SEC Marketing Rule examinations
Areas of examination will include Marketing Rule policies and procedures, substantiation requirement, performance advertising requirements and books and records. With the Nov. 4 deadline fast approaching, investment adviser firms should prepare accordingly.
The risk alert stated:
- Advisers are expected to adopt and implement written policies and procedures that are objectively and through testable means reasonably designed to prevent violations by the advisers and their supervised persons.
- The staff will examine if advisers are able to substantiate material statements of fact in advertisements through documented empirical data
- The staff will assess whether the advisers are complying with net of fee performance requirements, composite construction requirements, including related portfolios and required performance time periods, extracted performance requirements, as well as hypothetical and predecessor performance requirements.
- Finally, compliance with applicable books and records and Form ADV reporting requirements will also be reviewed.
Not sure where to start or what’s required of your firm? Check out the NRS Marketing Review Module and discover how technology can help power your compliance program to meet the New SEC Marketing Rule.
About the Author
Max joined NRS in 2007 as a Consultant in the Investment Adviser Services Department and is based in our Massachusetts branch office. Max delivers comprehensive compliance solutions to all types of investment management firms, with special emphasis on private fund advisers, including hedge funds, funds of funds, private equity and debt funds, venture capital funds, real estate funds and other pooled investment vehicles.
Max earned his Juris Doctor degree Cum Laude from Boston College Law School in 2002. He is a member of the State Bar of Massachusetts.
After graduating from law school, Max accepted a corporate associate position with Choate Hall & Stewart LLP. During his tenure at Choate Hall, Max specialized in secured financing transactions, mergers and acquisitions, and bankruptcy litigation.
Max received his Bachelor of Arts degree Summa Cum Laude, graduating Phi Beta Kappa from Tufts University with majors in International Relations and Eastern European Studies.