Effective May 4, 2021, the SEC’s recently adopted amendment to rule 206(4)-1 of the Advisers Act went into effect.  The Advertising Rule, 206(4)-1, which addressed how advisers marketed their services to clients and investors, had not been updated with any substance since it was adopted in 1961.  The same is true for the “solicitation rule” adopted in 1979. The new investment adviser marketing rule amends the existing rule 206(4)-1, known as “the advertising rule,” and replaces rule 206(4)-3, the “solicitation rule.” The SEC believed it was appropriate to regulate both the investment adviser advertising and the solicitation activity of an adviser through a single rule: The Marketing Rule.

Why the change?

In the decades since adopting both rules, advertising and referral practices have evolved partly due to technological advancements in communication and access to information.  The “marketing rule” recognizes these changes and incorporates the SEC’s experience in administering these rules. Accordingly, the amendments to the rule contain principals-based provisions designed to accommodate the continual evolution and interaction between technology and advice.

The SEC “believes the final marketing rule will allow advisers to provide existing and prospective investors with useful information as they choose among investment advisers and advisory services, subject to conditions that are reasonably designed to prevent fraud.”

Who is affected?

The new marketing rule applies to all investment advisers registered or required to be registered with the SEC. It does not apply to the marketing of registered investment companies, business development companies, or exempt reporting advisers.

General Areas in the new rule:

  • Prohibitions
  • Testimonials and endorsements
    • Disqualifications
    • Exemptions
  • Performance Advertising
  • Social Media
  • Changes to Form ADV
  • Oversight and compliance
  • Record keeping

For more information on the Marketing Rule:
Marketing Compliance FAQ
Investment Adviser Marketing Rule (PDF)

Conclusion

Advisers must comply with the amended marketing rule by November 4, 2022.  Until November 4, 2022, an Investment Adviser must comply with either the existing “advertising rule” or implement all the components of the “marketing rule.” The Investment Adviser cannot choose to implement one area of the “marketing rule” without implementing all of it.

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