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Committed to keeping you updated on how the new SEC marketing rules will impact you and your firm.

We would like to remind you that effective Friday, November 4, 2022, the U.S. Securities and Exchange Commission’s new Marketing Rule amendments for investment advisers will come into full compliance. The amendments create a single rule that replaces the current advertising and solicitation rules. The final rule is designed to comprehensively and efficiently regulate investment advisers’ marketing communications.

The centerpiece of the new Marketing Rule is a switch to a principles-based regime, an updated definition of “advertisement” and seven new prohibitions for marketing materials that will help determine what will be considered “misleading.” The new rule speaks to the digital world of 24-7 media consumption and represents the most significant change, in more than 50 years, in how the SEC reviews advertising and solicitation by investment advisers.

We would like to provide a quick overview “checklist” (below) of what you need to know. For a more detailed comparison of the old rules vs the new rules, please reach out to to request a presentation or to set up a time to speak to a specialist.

Policies and Procedures
Update relevant marketing sections of your Compliance Manual to ensure compliance with the Rule.

Marketing Materials & Superlatives
Review any investor communications that are considered “Advertisements" to ensure compliance with the Rule and review the "Use of Superlatives". The SEC has indicated that the use of superlative language without supporting authority or objective basis is one of its most frequent observed delinquencies when reviewing advisers’ marketing materials. “Superlatives” are defined as “relating to or constituting the degree of grammatical comparison that denotes an extreme or unsurpassed level or extent.” The SEC has indicated that an adviser’s use of words such as “best-in-class,” “proven,” or “superior” in marketing materials may mislead clients regarding future performance or capabilities of an advisory firm.

Provide training to employees in marketing functions on differences between the old Advertising and Solicitation Rules and Marketing Rule. Update new hire and annual training presentations.

Books and Records
Determine if any new records must be kept.

Solicitation Agreements
Review current and future agreements to ensure compliance with the Rule. Placement agent arrangements are considered solicitation arrangements under the Rule.

Form ADV
Part 1: Item 5.L. New questions required to be completed by next annual amendment due March 31, 2023. Note that should an RIA draft or file an Other than Annual Amendment on or after November 4th, Section 5.L. will require completion (e.g., a set of incomplete answers within Item 5.L. may result in a completeness check error).
Part 2A : Item 14. Determine if any additional solicitation arrangements are required to be disclosed. Placement agent arrangements are considered solicitation arrangements under the Rule.
Part 2B : No change.

Testimonials and Endorsements
Assess the prospective use of Testimonials and Endorsements. Testimonials and Endorsements are permitted under the Rule subject to a number of conditions.

7 Marketing Rules and Prohibitions
Marketing Rule Prohibitions are reasonably designed to prevent fraudulent, deceptive, or manipulative acts. The Rule prohibits the following advertising practices:

  1. Making an untrue statement of a material fact, or omitting a material fact necessary to make the statement made, in light of the circumstances under which it was made, not misleading;
  2. Making a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate upon demand by the Commission;
  3. Including information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the adviser;
  4. Discussing any potential benefits without providing fair and balanced treatment of any associated material risks or limitations;
  5. Referencing specific investment advice provided by the adviser that is not presented in a fair and balanced manner;
  6. Including or excluding performance results, or presenting performance time periods, in a manner that is not fair and balanced; and
  7. Including information that is otherwise materially misleading including Use of Superlatives

Please contact us to schedule a consultation.

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