Page 37 - Investment Advisor July/August 2022

THE PLAYING FIELD

By Melanie Waddell

SEC Sends Email Warning on Marketing

Rule Compliance

The regulator is providing tips that advisors should heed, but more

guidance likely is needed due to other stumbling blocks.

he Securities and Exchange Rule, as amended, will require invest-
Commission has launched an ment advisors “to make and keep certain
Temail campaign reminding reg- records, such as records of all adver-
istered investment advisors about the tisements they disseminate, including
upcoming Nov. 4 compliance date for certain internal working papers, per-
the amended marketing rule — and steps formance related information, and
they’ll need to take to comply. documentation for oral advertisements,
FrontLine Compliance warned on testimonials, and endorsements.”
May 24 that “this first-of-its-kind mass The SEC directs advisors to review
email campaign by the SEC signifies that their Form ADV Part 2A brochure Item
the regulator has served notice that it will 14 (client referrals and other compen-
aggressively pursue actions against firms sation) with respect to Rule 206(4)-3
that fail to comply with the new rule.” (Cash Payments for Client Solicitations)
The compliance firm said to “expect being replaced by the Marketing Rule.
SEC targeted sweeps and exams to be a The securities regulator also recom-
While the SEC priority” once the compliance date hits. mends advisors review the following
While the SEC email — sent to all
email — sent to all RIAs on May 23 — lays out helpful tips information on the SEC’s website:
• Adopting Rule Release No. IA-5653
RIAs on May 23 — that advisors should heed, at least one • Marketing Compliance Frequently
Asked Questions
lays out helpful tips industry official says further SEC guid- • Rule 206(4)-1
ance is needed to help advisors navigate
that advisors should trouble spots that have cropped up. INDUSTRY EXPERTS WEIGH IN
As of Nov. 4, the SEC email states,
heed, at least one RIAs “may no longer choose to com- Since the rule went into effect last May,
industry official says ply with the previous advertising rule compliance experts have been caution-
ing advisors to tread carefully when
and cash payments for client solicita-
further SEC guidance tions rule or rely on the staff’s positions using testimonials and endorsements
is needed to help under those rules. Any advertisements before Nov. 4. The law firm Eversheds
Sutherland released a checklist in late
disseminated on or after the compliance
advisors navigate date are subject to the Marketing Rule.” February for advisors to use as they prep
Also, as of Nov. 4, Advisers Act Rule
for the Nov. 4 compliance date.
trouble spots that 206(4)-7, the Compliance Rule, “will Amy Lynch, founder and president of
have cropped up. require SEC-registered investment FrontLine Compliance, said in a video
message in May that the new rule will
advisers’ policies and procedures to
be updated and revised, as appropri- require “significant changes.”
ate, to ensure they are reasonably “Firms should be taking action now
designed to prevent violations of the to ensure a smooth transition to the new
Marketing Rule.” changes,” Lynch said.
Further, the email continues, Advisers Lynch highlighted key changes to
Act Rule 204-2, the Books and Records the rule:

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