Alternative Investment

SEC Announces Modernized Marketing and Advertisement Rule for Investment Advisers

The Securities and Exchange Commission announced on December 22, 2020 that it had finalized a new rule to modernize reforms under the Investment Advisers Act, governing investment advisers’ marketing, advertisements, and payments to solicitors. This announcement covers the modernized single rule changes that replace the current advertising and cash solicitation rules and the final rule to efficiently regulate advisers’ marketing communications.  

The new marketing rule recognizes the advances and changes in current technology and that expectations of investors seeking advisory services have changed as well as the industry’s investment advisory profiles diversification. The reforms allow advisers to provide investors with beneficial information as long as both investment advisers and the advisory services subject to conditions designed to prevent fraud.  

“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,” said Chairman of the U.S. Securities and Exchange Commission, Jay Clayton.  

The modernized rule will require advisers to standardize certain parts of their performance presentation to help compare and evaluate investment opportunities for investors. This will include tailored requirements for certain advertisements and permits the use of testimonials and endorsements, including traditional referral and solicitation activities, subject to certain conditions. Advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being deceptive. 

The press release from the SEC expands upon the updated rules with more principles-based provisions:  

• Updated definition on advertisement 
• Guidelines of testimonials and endorsements permitted and disqualifications  
• General prohibitions of advertising practices  
• Performance Information Generally 
• Amendments to the Form ADV 

All will be effective 60 days after publication in the Federal Register. The Commission has adopted a compliance date that is 18 months after the effective date to give advisers a transition period to comply with the amendments. 

If you have any questions on how the SEC modernizing marketing and advertisement rules can affect your fund and marketing best practices, read the full report linked above and contact Steve Vlasak.