3 Things to Do Now About the New Investment Adviser Marketing Rule
On December 22, 2020 the SEC released its new Investment Adviser Marketing Rule, intended to modernize the regulatory framework. Most Investment Adviser firms will find a little bit of good news and a little bit of bad news within the 430 pages. The rule restructures frameworks, repeals as-yet-unspecified No-Action Letters and has new definitions for old terms, and new terms for old activities.
3 Things You Can (and should) Do Now
- Be patient. The effective date will not occur before late March and the compliance date will likely be Q3 2022. The SEC still hasn’t identified the old No Action Letters, which are being withdrawn, and we haven’t seen FAQ’s or commentary from the Division of Investment Management yet. If the rollout of Reg BI is a useful guide, we can expect to see FAQ’s sometime this summer, surveys and observations by the Division of Examinations next winter, and further guidance well ahead of the compliance dates. The Commission has made great strides toward providing transparency during the last ten years and has given us plenty of warning before sweeping changes like this one were enacted. Reg BI was fairly daunting a year ago, but by now you most likely have made large steps toward compliance – even though we’re still five months out from the final compliance date. Time is on your side.
- Be methodical. Take it one topic at a time and identify any changes you need to make. There’s a lot to unpack. Testimonials are now (generally) allowed, the rules around performance advertising have been liberalized, solicitors are now promoters and the definition of advertisement itself has been expanded. You have added responsibility around third-party statements, your ability to substantiate your own statements of fact and presentations and appearances. As better guidance becomes available, we will address the parts that matter to your business in turn.
- Stick to the basics. The new rule represents a change to the structure around some activities, but it also relies heavily on referring to the principles in the Anti-Fraud provisions of the Advisers Act. You already look at advertising through the anti-fraud lens, and you probably treat some materials as advertising, even if they don’t technically fall under the old definition of advertisement. Fundamentally, if your firm engages in mass communication beyond “radio, television, and print,” your communications may already be better aligned with the new rule than they were with the old one.
Oyster will review your advertising and communication with the public and assist your firm with social media best practices as well as record keeping. For more information about how Oyster can help your firm, call (804) 965-5400 or click here.
About the Author: As a Director at Oyster, Lance Whittemore has designed, implemented and maintained compliance programs for SEC- and State-registered investment advisors, and has served as CCO for several of them. He has also worked in multiple engagements of varying scope with Registered Investment Advisors, broker-dealers and clearing firms, performing examinations, audits, and remediations of various aspects of their control and supervisory programs. Lance began his more than 20 years in the financial services industry at NationsBanc Capital Markets (now Banc of America Securities) in municipal fixed-income trading and underwriting. His extensive experience also includes bond sales for Bank of America, retail investor financial consultant for UBS, and just prior to joining Oyster, Lance was in fixed income trading at Wachovia Securities (now Wells Fargo Advisors) where he traded high yield corporate, emerging market, international, and non-dollar credit securities.