Registered investment advi- sors are ringing in the New Year with a new rule by theSecurities and Exchange Commissionthat will allow them to market themselves in the 21st Century.
At press time in early January, advisors still were deciphering the SEC’s 400plus-page rule — which allows advisorsto use testimonials and endorsements —but largely viewed the rule as positive.
The new Investment Adviser Marketingrule creates a single rule that replaces thecurrent Advertising and Cash SolicitationRules. The advertising rule was adopted in1961 and the solicitation rule in 1979.
“On balance, the new rule as adopted
is a huge improvement over the cur-
rent framework as well as what was
proposed in 2019 — both from a compli-
ance standpoint but also from a business
marketing point of view,” said Sanjay
Lamba, associate general counsel at the
Investment Adviser Association, during
an early January webcast. The new rule
moves away “from the patchwork regu-
lation of no-action letters” and creates a
rule that is “evergreen and can adapt and
change with the times.”
One immediate question among advi-
sors: will the incoming Biden adminis-
tration let the rule stand?
Valerie Mirko, a partner at BakerMcKenzie in Washington, said during anearly January webcast that she doesn’texpect a Biden SEC to have an impacton the ad rule. “It is usual that thisrule and others were finalized after theelection — 2020 was unprecedented aswell,” Mirko said. “The SEC is also anindependent commission. This rule wasthe subject of a unanimous vote” when itpassed in late December.
Former SEC Chairman Jay Clayton
said in a late December statement that
the “comprehensive framework for regu-
lating advisers’ marketing communica-
tions recognizes the increasing use of
electronic media and mobile communica-
tions and will serve to improve the qual-
ity of information available to investors.”
The new rule, Clayton said, “pro-
vides for an extended compliance peri-
od intended to provide advisers with
a sufficient transition period, includ-
ing to enable consultation with the
Commission’s expert staff.”
James Lundy, partner at Faegre Drinker
in Chicago, called the revamped ad rule
“positive.” The old rule “was archaic and
proscriptive, and no longer really appro-
priate for the way firms do business and
communicate in the 21st century.”
Added Lundy: “We’ll all need to wait
and see how [SEC] examines for compli-
ance with and enforcement investigates
potential violations of the new rule, but
overall this is positive for the industry.”
In a note to IAA’s members Karen
Barr, president and CEO, said that “over
the years, the SEC added hundreds of
pages of piecemeal guidance to the rule
— making its requirements a nightmare
for compliance-minded advisers to sift
through, sort out, and interpret.”
The SEC has achieved a “Herculean
task,” Barr said by “collecting all of that
guidance, accounting for all of the infor-
mation technology, social media, and
marketing practice advancements over
more than half a century, and fusing
them into a modern, principles-based,
evergreen, workable framework.”
Advisors, Barr said, “will be able to
better engage on social media, share their
clients’ experiences with prospects, and
THE PLAYING FIELD
By Melanie Waddell
Advisor Advertising Rules Enter 21st Century
The SEC’s new ad rule provides advisors many opportunities, as well as
“requirements that may require more clarity,” says IAA’s Barr.
The new rule movesaway ‘from thepatchwork regulationof no-action letters’and creates a rulethat is ‘evergreen andcan adapt and changewith the times.’—Sanjay Lamba,Investment Adviser
Association
