SEC Marketing Rule

On December 22, 2020, the U.S. Securities and Exchange Commission (the “SEC” or the “Commission) adopted a single, unified rule (the “Marketing Rule”) that replaces (i) rule 206(4)-1 (the “Advertising Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”), which governs investment adviser advertising, and (ii) existing rule 206(4)-3 (the “Cash Solicitation Rule”) under the Advisers Act, which governs advisory client solicitation arrangements. These amendments modernize the Advertising Rule and Cash Solicitation Rule, which had not been significantly updated since their adoption in 1961 and 1979, respectively. 

The Marketing Rule was not, however, adopted with the uninhibited support of each SEC commissioner, and several SEC commissioners have stated these amendments did not go far enough. A statement by Commissioner Allison Herren Lee and Commissioner Caroline A. Crenshaw expressed concerns that certain revisions from the proposed rule “will likely place advertisements on the list of examination and enforcement priorities for years to come”, and indicated that they “believe it will be important for the Commission to closely monitor industry implementation of the rule to consider whether additional revisions or protections may be warranted going forward”. The statement by Commissioners Lee and Crenshaw could foreshadow an increased regulatory focus on investment adviser marketing in the examination, enforcement and rulemaking contexts. Thus, while the new Marketing Rule may offer some level of additional flexibility, it may also signal an increased regulatory focus and associated risks.

Read our full analysis using the PDF link below.