Implement Effective Policies and Procedures to comply with the SEC’s Marketing Rule

On December 22, 2020, the U.S. Securities and Exchange Commission (SEC) adopted amendments (the final rule) to Rule 206(4)-1 under the Investment Advisers Act of 1940 (the Advisers Act) to modernize the regulation of investment adviser advertising and solicitation practices.

The SEC replaced the current versions of Rule 206(4)-1 (the advertising rule) and Rule 206(4)-3 (the solicitation rule) with a single “Marketing Rule.” The final rule was published in the Federal Register on March 5, 2021 (86 FR 13024), making its effective date May 4, 2021 with a compliance date 18 months thereafter.

Among other things, the final rule does the following:

  • revises the definition of advertisement,
  • allows, subject to certain conditions and disclosures, compensated and uncompensated testimonials and endorsements,
  • delineates rules on third-party content,
  • relaxes the current rule’s prohibition against past specific recommendations,
  • codifies performance presentation standards.

Advisers looking to take advantage of new provisions to expand their web and social media presence may be considering early adoption of the final rule, well before the compliance date. However, early adoption may well come with caveats and conditions that some firms are not prepared to handle.

In its first published Frequently Asked Question (“FAQ”) addressing the Marketing Rule, the SEC announced that it will require an “all-or-nothing” implementation approach, meaning that to take advantage of select provisions of the final rule, advisers will need to comply with all relevant provisions thereunder and implement effective policies and procedures to ensure compliance.

Among some of the hurdles that may need to be overcome are possible extensive revisions to compliance manuals, revamping of existing performance presentations and repapering of existing solicitation agreements.

Find out how NRS Consultants can help your firm implement effective policies and procedures to comply with the SEC’s marketing rule!