SEC Releases Risk Alert on Marketing Rule Exam Priorities

The Securities and Exchange Commission Monday released a Risk Alert highlighting the upcoming Nov. 4 compliance date for its new Marketing Rule and outlining areas of focus for examiners.

As of Nov. 4, the SEC warns, advisors may no longer choose to comply with the previous advertising and cash solicitation rules.

Further, the SEC is withdrawing certain staff statements relating to those rules.

Advisors should consider whether they need to update or revise their written policies and procedures, as required by Advisers Act Rule 206(4)-7, “to ensure they are reasonably designed to prevent violations by the advisers and their supervised persons of the Marketing Rule,” the SEC states.

The agency also warns that Advisers Act Rule 204-2 (the Books and Records Rule), as amended, “will require investment advisers to make and keep certain records, such as records of all advertisements they disseminate, including certain internal working papers, performance related information, and documentation for oral advertisements, testimonials, and endorsements.”

Ken Joseph, managing director and head of the Financial Services Compliance and Regulation practice for the Americas at Kroll, predicted in a previous interview with ThinkAdvisor that SEC examiners will include compliance with the Marketing Rule as a focus area for 2023.

Sanjay Lamba, associate general counsel for the Investment Adviser Association in Washington, told ThinkAdvisor Monday in an email that the risk alert signifies the agency’s “intent to conduct examination very soon after — if not starting on — Nov. 4.”