Advisors Take Note: These 8 States Have New Telemarketing Laws

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A growing list of states are strengthening their telemarketing laws in part due to a Supreme Court ruling, Facebook v. Duguid, that in 2021 significantly narrowed the definition of an automatic telephone dialing system, also known as an ATDS or auto-dialer, under the Telephone Consumer Protection Act.

The TCPA prohibits the use of auto-dialers to contact consumers without their consent, the law firm Eversheds Sutherland explained. When the court narrowed the federal definition, some states took matters into their own hands. Others expanded their laws to cover texting.

“Many of the new and amended state laws have broader definitions of ATDS than does the TCPA, and many states impose other unique restrictions for communicating via phone and text,” the law firm Eversheds Sutherland wrote in a recent alert.

Plaintiffs can bring claims under many of these laws in addition to, or in conjunction with, claims under the TCPA, according to Eversheds.

Best Practices for Advisor Communication

Lewis Wiener, partner at Eversheds, said that brokers and advisors should “observe best practices” when calling customers. “Know who you’re calling,” Wiener said, and “know whether you’re calling a landline or cell phone. If there’s any doubt, assume you’re calling a cell phone.”

The TCPA, Wiener continued, “was designed to limit, through the consent requirement, the ability of telemarketers to call people on their cell phones. Since landlines were billed differently — and generally much lower — the restrictions on calls to landlines are not as stringent.”

Also, “scrub your numbers against the federal, state, and company-specific Do Not Call lists and get consent upfront,” Wiener advised.

SEC Marketing Rule

Issa Hanna, partner at Eversheds, added Monday in an email that investment advisors not only risk running afoul of state laws but also violating the Securities and Exchange Commission’s Marketing Rule when telemarketing their services.

“While oral communications are generally excepted from the first prong of the definition of ‘advertisement,’ there is an exception to that exception for advisors’ scripted oral communications that include offers of advisory services,” Hanna said.

Moreover, Hanna continued, “oral communications that qualify as compensated endorsements or testimonials are also within the scope” of the SEC’s marketing rule.

Further, “text messages that include offers of advisory services are deemed to be ‘in writing’ and therefore within the scope of the first prong of the definition of advertisement,” Hanna said.

Bottom line: “The SEC will expect compliance with the Marketing Rule with respect to telemarketing communications that are advertisements under the rule,” Hanna relayed.

See the gallery for the states that have enacted new “mini-TCPAs” in the past few years, as explained by Eversheds.

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