Registered investment advisors viewed the new marketing and advertising rule as the hottest compliance topic in 2021, according to an Investment Adviser Association poll.
"Over the past two years we have been advising many clients on compliance with the new rule and have had discussion with the SEC staff regarding a host of implementation issues," Kirsch said. "As we get closer to the rule's compliance date, we still see advisers dealing with a myriad of open issues regarding the rule's requirements."
Issa Hanna, partner in Eversheds Sutherland's Investment Services practice, told ThinkAdvisor Friday in an email that advisors are grappling with the following issues around marketing rule compliance:
- When should we treat a cross-referral arrangement between a financial advisor and some other professional (like a lawyer or accountant) as a compensated endorsement/testimonial arrangement for purposes of the rule?
- When are we deemed to adopt or become entangled with reviews on popular websites like Google Reviews, Yelp, etc.?
- How do we establish that a retail investor has the requisite levels of resources and expertise to receive hypothetical performance information?
- Is a model portfolio fact sheet that we show to our clients our advertisement?
- Do we have to deduct our own fees from third-party adviser's/model provider's fact sheets to comply with the rule's net of fees requirement?
The SEC released a FAQ on the rule last April, warning that the agency didn't "want firms to partially comply with this rule" before November, Amy Lynch, founder and president of FrontLine Compliance, told ThinkAdvisor in a previous interview.
The use of testimonials and endorsements "before the firm is fully compliant and updating its compliance [policies and procedures] … that is a huge risk to the firm," Lynch said.
