Fact 1: The SEC Marketing Rule was adopted at the end of 2020, with an effective date of May 4, 2021.
Fact 2: Today, many firms still struggle to effectively navigate marketing rule requirements. With some finding themselves in the crosshairs of the SEC Examinations staff.
Recently the SEC has released a new Risk Alert, which highlights where they have found deficiencies in the application of the rule. While the Risk Alert noted issues with Policies and Procedures, Books and Records, and ADV requirements, it also highlighted the following:
- Untrue statements of material fact and unsubstantiated statements of material fact.
- Omission of material facts or misleading inference.
- Fair and balanced treatment of material risks or limitations.
- References to specific investment advice that were not presented in a fair and balanced manner.
- Inclusion or exclusion of performance results or time periods in manners that were not fair and balanced.
- Advertisements that were otherwise materially misleading.
Best Practices for Marketing Rule Compliance
So, what can your firm do to take advantage of the opportunities presented by the new Marketing Rule without increasing risk?
- Substantiate claims with documentation: If you’re going to make any type of claim regarding performance, returns, years of service or experience, you must be prepared to back that information up to the regulator with proper documentation.
- Keep thorough records: Following the recent ruling changes, RIAs have new books and records requirements and need to keep records regarding any type of advertisements they share, including online, in print, radio ads, television ads, videos, etc.
- Make sure all statements are accurate, fair, and balanced: If you have any doubts or you aren’t 100% sure something is true, then avoid saying it altogether in your advertisements. Untrue statements are deceiving. Additionally, if you choose to discuss the potential benefits of a certain service or operating method, you need to treat the claim with fairness and balance. Provide evidence regarding the risks associated with this opportunity as well.
- Never skew performance results: Do not mislead potential clients by removing or excluding certain time periods which yielded poor or undesirable returns. Specific time periods are required, as well as proper detailed disclosures.
- Conduct thorough reviews of all marketing materials: Regardless of whether your firm engages in traditional advertising or marketing, materials that are ubiquitous, like business cards or the firm’s website, are considered marketing materials. Because of this, advertising reviews should always be conducted, even if such a review is as simple as confirming the compliance of an individual’s business cards.
Navigating Marketing Rule Compliance with COMPLY: The Marketing and Advertising Review Solution
Feeling overwhelmed by the nuances and requirements of the SEC Marketing Rule? That’s where we can help.
Marketing and advertising are essential tactics in attracting new clients, however, certain precautions must be followed to ensure your firm does not violate any regulations which restrict certain marketing activities.
Leverage COMPLY experts to evaluate new marketing materials to ensure consistency with regulatory requirements. Plus, receive recommended disclaimers.
Ready to achieve COMPLYance with confidence? Let’s talk!