A recent survey from the Investment Advisor Association found that the Marketing Rule remains the number one concern for advisers for the third year in a row. Even as resources for compliant marketing grow, advisers are wary of crossing regulatory lines in their marketing efforts – and for good reason. Penalties can land in the hundreds of thousands of dollars, and while reputational damages are harder to assess, it’s clear that advisers must tread carefully while advertising their services to clients and prospects.
But that doesn’t mean firms need to nix their marketing campaigns altogether – in fact, hyper-growth firms are reported to spend more time and money on marketing efforts, with one in five of those firms spending at least 20% of revenue on such efforts.
The key lies in a comprehensive understanding of compliant marketing requirements. To reach your target audience without flouting the rules, it’s important to invest in your team’s knowledge. Today, we’ll be covering the top ten marketing compliance rules your team should know before diving into your next marketing campaign to ensure compliance with the SEC Marketing Rule.
10 Rules of Compliant Marketing: Complying with the SEC Marketing Rule
1. Avoid over-reliance on AI while blogging
Blogging is a great way to show off your expertise while offering a valuable, easily-accessible resource to clients and prospects.
However, it’s becoming increasingly common for organizations to use artificial intelligence tools (such as ChatGPT) to draft blogs. While it can be useful and time-saving to lean on these tools, be aware that using AI may lead to risks surrounding information confidentiality and systems security. It’s best to set clear policies and procedures for your staff on what is and isn’t appropriate uses sooner rather than later.
2. Monitor all personal and professional social media accounts
Did you know that only 17% of compliance professionals require approval of their employees’ social media activity? This is especially surprising since social media posts and messages are considered valid marketing and communication methods by regulatory bodies – and thus subject to compliance laws.
When you or your team use social media, it’s important to:
- Archive all messages and posts
- Avoid specific recommendations, guarantees or promises
- Keep professional and personal accounts separate
- Use any necessary disclosures or disclaimers
- Implement monitoring techniques or software
- Avoid hypothetical performance
Related: Tips & Tricks for Chief Compliance Officers: Manage Social Media Risk
3. Keep advertisements accurate and truthful
Any advertising material, whether in print or digital form, must provide accurate and truthful information. This includes avoiding any misleading statements about financial products or services.
Of course, you’re likely aware that the SEC’s new Marketing Rule now allows for testimonials and endorsements in advertising – but be aware that these new allowances also come with new disclosure requirements.
4. Emails and newsletters count as marketing, too
Per the SEC, all written communications with clients must be stored for at least five years – and that includes those emails and newsletters.
Regardless of which email automation software you use (if any), it’s up to your organization to ensure those records are kept and stored properly. If your decades-old Outlook account suddenly crashes, the SEC is unlikely to make an exception, so it’s a good idea to have a backup archival method in place.
Click here to download the Best Practices for Email Surveillance Checklist
5. Document all event marketing materials
Whether you’re wining and dining prospects or hosting a charitable gala, all event communications should be run by your compliance team and properly archived. This includes invitations, promotional materials, presentations, attendee lists and more.
When in doubt – document!
6. Texting and third-party communication tools often require extra security measures
Texting is a convenient – and even often the preferred – method for communicating with clients. However, text messaging apps and third-party communication providers can also leave your firm open to security and compliance risks.
Firms would be wise to implement clear policies and procedures for staff surrounding third-party communication platforms, provide regular training and take measures to ensure security measures are in place.
7. Keep hypothetical performance data off your website
Financial firms’ websites are a crucial marketing tool, especially since websites are often a first-stop for potential clients. Compliance laws, including accurate disclosures and avoiding hypothetical performance data, must be followed rigorously.
Hypothetical performance data is really only acceptable in certain contexts, and there is no way to control the audience for your website.
Even if you outsource your website copy, design and creation, it’s wise to run any website updates or changes by your compliance team before hitting publish.
8. If you’re going to use testimonials, be sure to get the disclosures right
Testimonials and endorsements are now allowed per the new Marketing Rule, but what exactly should those look like?
To keep compliant, you’ll need to:
- State client status
- Disclose any compensation
- Be transparent about any conflicts of interest
- Explain compensation arrangements
- Disclose any conflicts of interest due to the compensation arrangement
Also keep in mind that cherry-picking isn’t allowed; you must ask your entire book of clients for testimonials – not just the ones you expect to leave positive feedback.
9. Review and update disclosures regularly
When it comes to disclosure, it’s easy to get in the habit of “copy and paste.” However, disclosure requirements can change, as can your relationship with certain clients, platforms or third-party providers.
It’s wise to review and update your marketing disclosures for each new campaign or project, or if there are any new regulatory requirements to consider.
10. You’re responsible for the disclosures, even if you work with social media influencers
Influencers can make a big impact on your marketing efforts, and it’s not unheard of for financial organizations to partner with the digitally affluent to promote their services. However, it’s critical that firms be aware of the compliance rules surrounding influencer marketing.
One RIA found that out the hard way when they were recently fined $250,000 for paying influencers to market their services without providing sufficient disclosures and documentation.
Remember, even if the influencer is posting the advertisement, your firm is responsible for ensuring the content is compliant per regulatory laws.
Adhering to these ten rules of compliant marketing is crucial for financial firms looking to build trust with clients and operate within the bounds of marketing guidelines. By following these rules, firms can more confidently market their services while maintaining compliance.
Market your firm with confidence
COMPLY can help your firm automate your marketing compliance processes to save time, avoid penalties and improve efficiency. Click here to get started today.