On December 22, the SEC finalized significant revisions to its rules under the Investment Advisers Act governing advertising and solicitation by investment advisers. The new Marketing Rule represents the first substantive changes to the Advertising Rule and Solicitation Rule since their adoption more than 40 years ago.
The Final Rule made several significant changes to the November 2019 Proposal. Perhaps the most notable is removing the proposed codification of disparate standards for retail and non-retail advertisements, which has been replaced by a general expectation to tailor communications based on audience sophistication and the adoption of several distinctions between advertisements to private fund investors and advertisements for other types of clients. A new flat prohibition on presenting gross performance data without net performance, regardless of audience sophistication, is another significant shift from both current practice and the Proposal. While the proposed pre-review requirement for advertisements has not been adopted, we expect modifications will still be needed to advisers’ existing communication protocols.
The Marketing Rule will become effective 60 days after publication in the Federal Register, with compliance required 18 months after the effective date.
This alert memorandum discusses our key takeaways and summarizes the notable points from the Final Rule, along with specific interpretive issues that could yield unintended consequences, create additional compliance obligations or require changes to policies and procedures.