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SEC Proposes to Modernize the Advertising and Cash Solicitation Rules for Investment Advisers


While the industry was awaiting the November 5, 2019 Open Meeting of the SEC as previously announced, the SEC Commissioners instead, voted on November 4th, without the open meeting, on the proposals and proposed amendments that would modernize the rules addressing investment adviser advertisements.


The SEC proposed significant changes to the advertising rule as identified below:

1. The proposed rule permits testimonials, endorsements, and third-party ratings, provided that certain additional restrictions and conditions are satisfied.


2. The definition of “advertisement” as proposed means any communication, disseminated by any means, by or on behalf of an investment adviser.


3. Social media is not identified but falls within the scope of “by any means.”  In this way, the SEC indicated that it would allow the rule to stay “evergreen” due to unforeseen technologies and less focus is on the delivery mechanism and greater focus is on the quality and substance of the message itself.


4. The proposed rule explicit pulls in to the definition advertisements that are distributed to investors in pooled investment vehicles but provides an exemption for publicly offered investment companies.


5. For the first time, the SEC proposal includes requirements on performance advertising specifically in the advertising rule whereas such guidance has come through “no-action” letters.


6. Performance information in a retail advertisement will require side by side gross and net information as well as performance results 1, 5 and 10-year periods.


7. The proposal introduces a new requirement that advertisements to more than 1 person be reviewed and approved in writing by a designated employee before distribution.


8. Finally, the proposal would require investment advisers to provide information regarding their advertising practices in their Form ADV.


The proposed amendments will be published on the Commission’s website and in the Federal Register.  The public comment period will remain open for 60 days after publication in the Federal Register.


We encourage the industry to respond with comments and responses to the questions asked by the SEC. Beginning on page 484 of the Proposed Rule, the Commission provided two information gathering tear sheets (“feedback flyers”). Investors are encouraged to submit additional feedback about their experiences with adviser marketing on the investor feedback flyer. Smaller advisers are encouraged to submit additional feedback about how the proposed rules would affect them on the adviser feedback flyer. The feedback flyers are available beginning on page 48 of the Proposed Rule.


For More Information:

Press release: https://www.sec.gov/news/press-release/2019-230

Proposed Rule: https://www.sec.gov/rules/proposed/2019/ia-5407.pdf


#Compliance4 #AdvertisingRule #Advertising #Compliance #SEC #Modernization #InvestmentAdviser #RIA #financialservices #performance #advertisement #socialmedia #formadv #PeterRGuarino #ElizabethGuarino


Elizabeth Hamilton-Guarino



Elizabeth Hamilton-Guarino is the Chief Executive Officer of Compliance4. 

With her deep experience and understanding of SEC and FINRA rules, as well as EDGAR, Elizabeth helps companies with their branding efforts, establish a positive on-line presence, engage their clients and position the company and develop their brand appropriately and ethically in social media. Elizabeth is a 20-year veteran of the financial services industry. Elizabeth has held regulatory positions at Merrill Corp, Integreon, American Financial Printing and Dow Investment Group. Elizabeth is a member of the New England Broker Dealer Investment Adviser Association.


About Compliance4:

Compliance4 is a boutique regulatory compliance consulting firm based in Portland, Maine. We are  a leader in the compliance and regulatory services industry by offering expert compliance services and high quality comprehensive regulatory solutions.

We offer superior outsourced compliance resources and expertise, designed to be an integral part of our client’s daily operations, resulting in a stronger, more focused and competitive firm. We strive to help our clients succeed in a financial marketplace by providing customized, sensible and practical compliance solutions that fit each client’s evolving needs.