The SEC Marketing Rule Sweep Has Begun

What You Need to Know

Are you being too aggressive with your marketing efforts? Be careful.
Don’t assume marketing consultants are compliance experts.
If you use, or market your use of, AI, be sure you have safeguards in place.

In February, The enforcement unit of the Securities and Exchange Commission’s Boston branch commenced Marketing Rule sweeps, notifying affected firms to preserve and produce records.

It is imperative that firms review their websites and marketing practices to ensure that they are compliant with the new Marketing Rule that became effective in November 2022, especially regarding the use or publication of testimonials, hypothetical performance presentations, and rankings/awards/recognitions.

It is also imperative to review and update firm policies and procedures to confirm that they appropriately address the new rule.

And be warned: While it doesn’t mean they do not exist, I have yet to encounter a marketing consultant that clearly understands the marketing limitations in the investment advisory industry. So do not rely on them for compliant marketing materials.

As many of you have heard me profess countless times, the use of puffery and/or statements that can’t be definitively corroborated could prove problematic, not to mention the inappropriate use of testimonials. Well, that day has apparently come. Avoid using unnecessary adjectives and/or uncorroborated laudatory/promissory statements; always add a modifier like “help,” “strive” or “believe.” Also avoid using the word “ensure” or other statements that connote a guarantee. Be careful of statements touting “conflict free” advice or services. 

Although I have no empirical proof, I am assuming that the SEC is using artificial intelligence to comb through advisory firm websites. I am currently addressing a few of these matters with the Boston branch.