SEC Exams Division Reminds Advisers to Comply with Marketing Rule

In a Risk Alert, the SEC Division of Examinations ("Division") warned advisers to review their marketing practices and advertisements to ensure compliance with the recently amended Advisers Act Rule 206(4)-1 (the "Marketing Rule").

As previously covered, the SEC adopted the amendments under the Advisers Act for the advertising and cash solicitation rules, the books and records rule, and Form ADV.

The Division stated that staff will review the following areas for compliance in connection with Rule 206(4)-1: (i) policies and procedures, (ii) whether advisers have a "reasonable basis" to believe they will be able to "substantiate material statements of fact in advertisements," (iii) performance advertisement requirements and (iv) books and records. In addition, the Division encouraged advisers to review their websites and marketing materials for compliance and written policies and procedures.

The Division said that staff will continue to review advisers’ marketing practices and disseminated advertisements for violations of prohibitions regarding (i) untrue material facts, (ii) information that could create an untrue or misleading implication or (iii) specific investment advice and omitting or including performance results that are "not fair and balanced."

In conducting "focused examinations," of advisers’ advertisements that include testimonials and endorsements, Division staff said it plans to review whether the necessary disclosures are provided, oversight conditions are met, written agreements with promoters are entered into and ineligible persons have been improperly compensated for testimonials.