SEC Marketing Compliance: What Advisors Should Know

The new SEC Marketing Compliance Rule defines advertising as financial advisor client communications made directly or indirectly by the advisor or by compensated third parties, such as paid endorsements or testimonials.

In 2020, the SEC Marketing Compliance Rules that govern investment advisor marketing were updated. The amendments create an SEC Marketing Compliance Rule that reflects market developments and regulatory changes since the advertising rule’s adoption.

The SEC Marketing Compliance Rule is designed to regulate financial advisor client communications.

Will your marketing be SEC compliant in 2022?

Whether you are an IAR registered with the SEC or a State, a Registered Representative associated with FINRA, an Insurance Agent or some combination of all three, there are certain rules and regulations that must be followed. Trying to navigate SEC, FINRA, and Insurance Department regulations can be challenging as rules are constantly updated and interpreted differently from firm to firm.

Below we will provide some general guidance on key considerations when creating material, but it is important to work directly with your compliance department to ensure all firm policies and procedures are being followed prior to using the materials.

  • All communications must be fair, balanced, and complete and not omit material information
  • False, misleading, promissory, exaggerated, or unsubstantiated statements or claims are prohibited
  • Communications may not predict or project performance (with certain exceptions)
  • All sources must be clearly identified
  • Statements must be clear and provide a balanced treatment of risks and potential benefits
  • Communications must be appropriate for the audience
  • Appropriate disclosures should be included

In some instances, firms prohibit texting, messaging services, social media sites, or collaboration applications (e.g., WhatsApp, WeChat, Facebook Messenger, Slack, or HipChat) for business-related communication with customers. It is important to work with your compliance team to determine what you can and cannot use for business communications and advertisements.

How has SEC Rule 206 (4)-3 changed things for financial advisors?

The SEC Marketing Compliance Rule is a modification of Rule 206(4)-1 under the Investment Advisers Act of 1940, as amended, which combines elements of former Rule 206(4)-3 to create a single integrated rule that revolutionizes the regulatory outline of marketing strategies for financial advisors.

Under the general prohibitions, marketing strategies for advisors must not:

  • Include an untrue statement of a material fact, or omit to state a material fact necessary to make the statement made, in light of the circumstances under which it was made, not misleading
  • Include 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
  • Include 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
  • Discuss any potential benefits without providing fair and balanced treatment of any associated material risks or limitations
  • Reference specific investment advice provided by the adviser that is not presented in a fair and balanced manner
  • Include or exclude performance results, or presenting performance time periods, in a manner that is not fair and balanced
  • Otherwise be materially misleading

Your marketing team and compliance department should work together to develop a robust SEC marketing compliance plan. This will ensure all of the content you produce and share will fall under the SEC marketing compliance parameters.

Our VP of Marketing, Matt Seitz, worked with our in-house compliance team to create an eBook on compliant marketing strategies for financial advisors.

Click here to get your FREE copy.

How are top financial advisors updating their marketing materials to ensure compliance?

The new SEC Marketing Compliance Rule went into effect on May 4, 2021, and wealth professionals must be compliant by November 4, 2022.

Update any financial advisor client communications that would be considered advertisements, and get ready to validate any statements of material fact included in your marketing materials.

Rewrite your policies and procedures, especially those that govern financial advisor client communications, social media use, digital marketing, and the use of testimonials.

Regulations change quickly and often, so it is critical that you stay as up-to-date on compliance as you do on investment advisor marketing.

Luckily, there are countless convenient ways to get information to ensure you are keeping up with marketing strategies for financial advisors and compliance trends.

Want to take the guesswork out of compliance? Schedule a FREE 20-minute call to see how C2P Enterprises can help you get proven results!