5 Trouble Spots the SEC Found in Marketing Rule Exams

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The Securities and Exchange Commission’s focus on the new Marketing Rule continues, with the agency releasing Wednesday a new risk alert detailing trouble spots it’s seeing in exams.

The risk alert, released by the Division of Examinations, shares preliminary observations to encourage accurate completion of the Marketing Rule items contained in Form ADV and to promote compliance with Advisers Act Rule 206(4)-7 (the Compliance Rule), as well as Advisers Act Rule 204-2 (the Books and Records Rule) and the Marketing Rule’s General Prohibitions.

Sanjay Lamba, associate general counsel for the Investment Adviser Association in Washington, said that while the risk alert “focuses on compliance with the Rule’s principles-based general prohibitions and related recordkeeping and Form ADV disclosure obligations,” as the SEC staff notes, “many of the deficiencies described in this Risk Alert may also be deficiencies under other parts of the Marketing Rule.”

The risk alert comes on the heels of the SEC’s targeted sweep of advisors’ Marketing Rule compliance, which has resulted in penalties being levied.

On April 12, the SEC settled charges with five registered investment advisors for Marketing Rule violations. All five firms agreed to settle the SEC’s charges and to pay $200,000 in combined penalties.

In September 2023, the SEC charged nine advisory firms with Marketing Rule violations as part of the ongoing sweep.

Read the gallery to see the trouble spots the agency lays out in the Risk Alert that advisors should pay attention to.

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