Insights into SEC’s Marketing Rule
By: Bobby Dormanesh
The SEC’s “Marketing Rule” (link to final rule) became effective on May 4, 2021 and has a fast approaching full compliance date of November 4, 2022. The updated rule is a major change to the regulatory framework for advertising and solicitation practices and applies to investment advisers that are registered or required to be registered with the SEC.
The rule redefines advertising, opens marketing channels, and enhances disclosure requirements. How it impacts your firm depends on your firm’s marketing and fundraising activities, and your firm should be updating its compliance programs.
What’s changing:
- Updates how advertisements are defined
- Replaces the previous four specific prohibitions with seven new general prohibitions
- Allows the use of testimonials, endorsements, third-party ratings, and hypothetical performance in advertisements
- Covers advisory clients and investors in private funds
- Permits testimonials and endorsements for which cash and noncash compensation is received
The modernized SEC rule creates additional avenues for how fund managers market themselves and ultimately fundraise. As marketing efforts evolve with the changing regulatory backdrop, it is important to scrutinize the materials being presented to current and prospective clients. The SEC principles place a higher burden on advisers, requiring them to maintain sufficient documentation supporting all claims being marketed.
How we can help
CLA is here to help you navigate the SEC’s new Marketing Rule and everchanging regulatory landscape. We have teams of industry specialists ready to help you meet your compliance needs and walk alongside you as you grow your AUM. Our team members are available to help you identify the right talent solution to ensure your compliance needs are met, or can supplement your operations by offloading back-office responsibilities so that you can focus on fundraising.
Craig Arends is a principal at CLA and is the managing principal of CLA's private equity practice. Craig brings a concentration of experience in providing accounting and transaction structuring advice for leveraged recapitalizations, purchase accounting and SEC reporting, assessing quality of earnings, and GAAP accounting. He has far-reaching experience with critiquing financial models and reviewing target companies' financial performance to identify cost reductions and/or operating efficiencies Craig has more than 30 years of experience in public accounting serving public companies, private equity groups, and companies, including a term as principal in charge of a Big Four Capital Markets Group in Moscow, Russia. He has led financial accounting due diligence projects for private equity investor groups and venture capital funds, primarily in the technology, communications, and manufacturing industries, as well as assisting with Foreign Corrupt Practice Act matters ranging from investigation of payments made, validation of compliance with corporate policies, and review of proposed transactions to ensure compliance. When not working, Craig enjoys watching any sports, but his most favorite are baseball, football and soccer.
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