Insights into SEC’s Marketing Rule

By: Bobby Dormanesh

The SEC’s “Marketing Rule” (link to final rule) became effective on May 4, 2021 and has a fast approaching full compliance date of November 4, 2022. The updated rule is a major change to the regulatory framework for advertising and solicitation practices and applies to investment advisers that are registered or required to be registered with the SEC.

The rule redefines advertising, opens marketing channels, and enhances disclosure requirements. How it impacts your firm depends on your firm’s marketing and fundraising activities, and your firm should be updating its compliance programs.

What’s changing:

• Updates how advertisements are defined
• Replaces the previous four specific prohibitions with seven new general prohibitions
• Allows the use of testimonials, endorsements, third-party ratings, and hypothetical performance in advertisements
• Covers advisory clients and investors in private funds
• Permits testimonials and endorsements for which cash and noncash compensation is received

The modernized SEC rule creates additional avenues for how fund managers market themselves and ultimately fundraise. As marketing efforts evolve with the changing regulatory backdrop, it is important to scrutinize the materials being presented to current and prospective clients. The SEC principles place a higher burden on advisers, requiring them to maintain sufficient documentation supporting all claims being marketed.

How we can help

CLA is here to help you navigate the SEC’s new Marketing Rule and everchanging regulatory landscape. We have teams of industry specialists ready to help you meet your compliance needs and walk alongside you as you grow your AUM. Our team members are available to help you identify the right talent solution to ensure your compliance needs are met, or can supplement your operations by offloading back-office responsibilities so that you can focus on fundraising.