Page 41 - Investment Advisor - Jan/Feb 2021
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THE PLAYING FIELD
By Melanie Waddell
Advisor Advertising Rules Enter 21st Century
The SEC’s new ad rule provides advisors many opportunities, as well as
“requirements that may require more clarity,” says IAA’s Barr.
egistered investment advi- Former SEC Chairman Jay Clayton
sors are ringing in the New said in a late December statement that
R Year with a new rule by the the “comprehensive framework for regu-
Securities and Exchange Commission lating advisers’ marketing communica-
that will allow them to market them- tions recognizes the increasing use of
selves in the 21st Century. electronic media and mobile communica-
At press time in early January, advi- tions and will serve to improve the qual-
sors still were deciphering the SEC’s 400 ity of information available to investors.”
plus-page rule — which allows advisors The new rule, Clayton said, “pro-
to use testimonials and endorsements — vides for an extended compliance peri-
but largely viewed the rule as positive. od intended to provide advisers with
The new Investment Adviser Marketing a sufficient transition period, includ-
rule creates a single rule that replaces the ing to enable consultation with the
current Advertising and Cash Solicitation Commission’s expert staff.”
Rules. The advertising rule was adopted in James Lundy, partner at Faegre Drinker
The new rule moves 1961 and the solicitation rule in 1979. in Chicago, called the revamped ad rule
“On balance, the new rule as adopted
“positive.” The old rule “was archaic and
away ‘from the is a huge improvement over the cur- proscriptive, and no longer really appro-
patchwork regulation rent framework as well as what was priate for the way firms do business and
communicate in the 21st century.”
proposed in 2019 — both from a compli-
of no-action letters’ ance standpoint but also from a business Added Lundy: “We’ll all need to wait
and creates a rule marketing point of view,” said Sanjay and see how [SEC] examines for compli-
ance with and enforcement investigates
Lamba, associate general counsel at the
that is ‘evergreen and Investment Adviser Association, during potential violations of the new rule, but
overall this is positive for the industry.”
an early January webcast. The new rule
can adapt and change moves away “from the patchwork regu- In a note to IAA’s members Karen
with the times.’ lation of no-action letters” and creates a Barr, president and CEO, said that “over
rule that is “evergreen and can adapt and
the years, the SEC added hundreds of
—Sanjay Lamba, change with the times.” pages of piecemeal guidance to the rule
One immediate question among advi-
— making its requirements a nightmare
Investment Adviser sors: will the incoming Biden adminis- for compliance-minded advisers to sift
Association tration let the rule stand? through, sort out, and interpret.”
Valerie Mirko, a partner at Baker The SEC has achieved a “Herculean
McKenzie in Washington, said during an task,” Barr said by “collecting all of that
early January webcast that she doesn’t guidance, accounting for all of the infor-
expect a Biden SEC to have an impact mation technology, social media, and
on the ad rule. “It is usual that this marketing practice advancements over
rule and others were finalized after the more than half a century, and fusing
election — 2020 was unprecedented as them into a modern, principles-based,
well,” Mirko said. “The SEC is also an evergreen, workable framework.”
independent commission. This rule was Advisors, Barr said, “will be able to
the subject of a unanimous vote” when it better engage on social media, share their
passed in late December. clients’ experiences with prospects, and
JANUARY/FEBRUARY 2021 INVESTMENT ADVISOR 39
