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We are nearing two years since the adoption of the SEC’s long overdue update to rule 206(4)-1, or the Marketing Rule. And what has previously been referred to as the “new” marketing rule is slowly becoming more ingratiated in organization, just becoming the marketing rule. While most of the aspects of this new rule are hopefully becoming standard parts of your marketing program, it’s worth remembering that while you may be getting more comfortable with the rule, the SEC is still focusing on marketing for organizations as part of their exams.
Earlier in September, the SEC announced they’re charging nine investment advisers with violations related to the marketing rule. This comes following having marketing listed as an exam priority for 2024, issuing a risk alert in 2024 related to the marketing rule, and two previous sweeps of a similar nature in September 2023 and April 2024.
What were the recent charges?
- Publishing advertisements with untrue statements about third-party ratings.
- Advertising that a firm was a member of an organization that didn’t exist.
- Distributing advertisements that claimed to provide conflict-free advisor services, which could not be substantiated.
- Circulating advertisements that could not substantiate an award provided to a firm principal.
- Disseminating advertisements claiming to contain two testimonials, but neither actually came from current clients.
- Failure to disclose endorser compensation in an advertisement.
- Including third-party ratings, some of which were over five years old, without disclosing the dates on which the ratings were given or the time-period that the ratings were based.
These charges continue to highlight the SEC’s focus areas with regards to previous sweeps or risk alerts and align with where we’ve been telling clients to focus on when cleaning up their marketing process. We know that the seven general prohibitions laid out in the marketing rule are a big focus for the commission and being prepared to substantiate every single claim you make in an advertisement has been a priority.
There’s been a focus on consistency between what is stated in your advertisements and what is actually occurring behind the scenes. The changes to the testimonials and endorsements / third-party ratings sections of the rule are a major concern, and the accuracy and completeness of the disclosures is important to the SEC.
While this isn’t new, we urge you to re-review your processes and advertisements, and evaluate if they’re exposed to any of these risks.
How can Bovill Newgate help your marketing program meet the Marketing Rule requirements?
Our team of compliance specialists include former SEC examiners who understand exactly what’s currently required and what might be coming down the line. Our tailored mock exams can assess both the investment and operational aspects of your business to make sure you’re prepared for interviews, and can confidently navigate document production and forensic testing.
We also conduct annual reviews, draft new policies, assist with operational compliance or can provide your teams with bespoke training to guarantee our compliance systems are robust.
If you’d like assistance with the review of your program, please reach out.
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