The Securities and Exchange Commission (SEC) has released a final rule change that will modernize the regulation of investment adviser advertising, which has not been done since 1961. The agency is calling it the “marketing rule.” Of course, over the decades technological advances in communication as well as diversification in securities markets and offerings have made the original rule, which focused on television, radio and print, a relic in some ways, but a relic everyone is used to.
The SEC is also modifying the solicitation rule, incorporating solicitation of clients into the new definition of “advertisement.” (The final rule also amends the investment adviser registration form, and the books and records rule.)
Nuts and bolts
After collecting public commentary on its original proposal, the SEC on Dec. 22, 2020, issued a press release announcing that it had finalized the new marketing rule after considering over 90 submitted comments. The agency took many public comments seriously and made changes to the proposal in response.
The agency announced that it would publish the new rule text and accompanying agency commentary (more than 400 pages in all) on its website and in the Federal Register, the official government publication for proposed and final rules.
As of this writing on Jan. 29, 2021, the final rule does not yet appear in the Federal Register. When it does, it will take effect 60 days from publication, followed by an 18-month transition period for investment advisers to understand and undertake the marketing changes they must make to comply with new requirements. Compliance will be mandatory as of the first day after the transition period ends.
In part 2, we will provide an overview of major provisions of the new investment adviser marketing rule.