SEC's new marketing rules

As part of Solutions Review’s premium content series (a collection of contributed columns written by industry experts in mature software categories), MirrorWeb Chief Operating Officer Harriet Christie shares what the SEC’s new marketing rules are. explain and outline how companies can ensure compliance. new standards.

U.S. Securities and Exchange Commission (SEC) marketing rules Approved in December 2020 and enacted on May 4, 2021. November 4, 2022— Comply with updated regulations. This article describes how and why it came into practice, the changes that have been made, and the next steps to be taken by the RIA compliance team.

why now?

The appeal behind the modernization of existing Advertising Rule 206(4)-1 is clear. It has remained essentially unchanged since its adoption in 1961. This era is before 2022 with the Internet, personal computers, and most of the technology at your enterprise’s disposal. As a result, the doctrine is a far cry from the landscape it dominates. This particularly affects RIAs based in (or serving) the United States. The updated iteration reflects modern habits: the mass consumption of digital media and the abundance of channels in which it occurs.


As part of the new marketing rule, the SEC will operate with a clean slate and rescind all arbitrary guidance issued as a stopgap since the original advertising rule. The regulator recognizes that “this revised rule replaces the outdated and patchwork regime on which advisors have relied for decades.” As this is a major overhaul, he was given 18 months for companies to comply.

Despite this generous grace period, it would be negligent to expect leniency on November 4th. On the contrary, it is less likely to appease regulators with excuses, given ample time to ensure the necessary upheaval. The recent influx of remote work has made it difficult to modernize processes and systems, but this was taken into account when the rules were approved.

The SEC has established that: The period of leniency forced by the pandemic is overThis could indicate how tolerant they are when it comes to compliance issues. Regulators appear to be serious about enforcing new marketing rules. launched in May email campaign Notify the RIA of the upcoming deadlines and the steps necessary to comply. Calling them a bluff or pleading ignorance seems like a stupid move.

Most RIAs seem to agree. The Investment Advisers Association recently Annual Survey of Compliance Officers 425 investment advisors shared their findings in July. For the second year in a row, marketing rule implementation is the top concern for RIA compliance officers. His 78% of respondents named advertising/marketing as the “hottest compliance topic for 2022,” up 20% from the previous year. A pressing deadline is no accident.

In the same survey, 96% of advisors expect to comply with marketing rules by the November deadline, and 11% report they are already compliant. Only 4% said their compliance timeframe was unclear. It was urgent and the message seemed to reach most of his RIAs.

But what do the new marketing rules mean and what should RIAs change?

1. One rule to rule them all

The new rule does what it says it does (unlike the current “ to simplify “patchwork”). -3.

2. So what is advertising?

To streamline this integration, the SEC has redefined “advertising” to cover two distinct points. Advertising now includes direct or indirect communications made by investment advisors, such as:

  • provide securities services to existing or prospective clients;
  • Consists of a guarantee or testimony that the advisor will provide cash or non-cash compensation

The impact of the above changes is significant. Previously, “advertisement” was limited to communications via print media (brochures, catalogues) or television and radio, but now it also applies to electronic communications. This means that a significant number of digital platforms (websites, emails, instant messaging platforms) are now under regulatory scrutiny.

The second point, which has always been essential in the world of advertising, encompasses the different forms of communication (endorsements and testimonials) that are now evolving into different forms, especially on social media platforms. They are a key weapon in a company’s marketing arsenal.

With a growing legion of agents wielding influence in every conceivable industry, companies are required to disclose whether individual/organizational posts are compensated by them. must enter into a written agreement with and oversee compliance with marketing rules. Responsibility rests with the advisor. There is no debate about where accountability lies.

3. 7 General Don’ts

The SEC has replaced existing prohibitions in advertising rules with seven new general prohibitions. Investment advisors may not disseminate advertisements that:

  1. Contains false statements or omissions
  2. Contain unsubstantiated material factual statements
  3. contains imprecise or misleading implications or inferences;
  4. Failure to provide fair and balanced treatment of material risks or material limitations
  5. Failure to present specific investment advice in a fair and balanced manner
  6. Cherry-picking performance results or otherwise presenting performance in an unfair and unbalanced manner
  7. seriously misleading

This principle imposes a high burden of proof on advisors and requires them to maintain evidence to support their claims. Simply put, advisors are required to catalog their “advertisements” to demonstrate compliance with the above provisions. This also applies to correspondence/documents that informed them of their understanding of whether the content within the advertisement is accurate, and the same applies to testimony and endorsements.

Role of Correspondence Archive

As more diverse communications fall within the definition of “advertisement,” the SEC issued Amendments Related to the Rules on Books and Records. RIAs must archive and maintain records of all advertisements they distribute. This includes emails, websites, social media profiles, and a growing list of platforms. Advertisements are defined by the messages they contain, not the means by which they are conveyed. This will keep the SEC from keeping up with legislation forever as digital channels continue to proliferate.

Proving compliance on an ongoing basis is not possible because the form is only displayed when you log on to the website. Historical data is easily accessible in other channels (social media, email, instant messaging), but these messages/posts are not stored immutably and can be retroactively deleted or edited. Archiving is the most efficient way to store metadata in a compliant, immutable format.

Ensuring compliance

The modernization of outdated regulations is poised to bring digital platforms into SEC jurisdiction and significantly increase compliance demands.

RIAs must be familiar with what constitutes an “advertisement”, as everything must be captured and recorded according to new marketing regulations. The additional workload impacts internal compliance processes, such as expanding compliance teams, enhancing company-wide training programs, and outsourcing to third-party his vendors.Above all, businesses need to ensure They are protected before the SEC’s November 4th deadline.

Harriet Christie
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