Comprehensive Analysis and Application of the SEC’s New Marketing Rule

border""

I. Comprehensive Application of the SEC’s New Marketing Rule

On December 22, 2020, the U.S. Securities and Exchange Commission (the “SEC” or “Commission”) adopted significant amendments to the advertising and solicitation rules applicable to registered investment advisers under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), as well as amendments to related rules governing recordkeeping and Form ADV (collectively, the “Amendments”).  Specifically, the SEC simultaneously amended Rule 206(4)-1 (the current “Advertising Rule”) and rescinded Rule 206(4)-3 (the current “Cash Solicitation Rule” and, together with the Advertising Rule, the “Existing Rules”) to create a new combined marketing Rule 206(4)-1 (the “Marketing Rule” or the “Rule”), which will comprehensively govern both advertising activities of advisers, as well as how they enter into solicitation/referral arrangements. The SEC also amended Rule 204-2 (the “Books and Records Rule”) under the Advisers Act to account for new recordkeeping obligations relating to the Rule and amended Form ADV to request additional information from advisers regarding their marketing activities.

The Amendments will become effective 60 days after publication in the Federal Register, and the Commission has adopted a compliance date 18 months from the effective date. As of the date of this publication, the Amendments have not yet been published in the Federal Register. After publication, early compliance is permissible, but advisers who choose to comply with the Rule prior to the compliance date must comply with all aspects of the Amendments.  The Rule does not apply to the marketing activities of registered investment companies or business development companies, as their marketing activities are covered under other rules. However, it does extend to marketing communications to private fund investors. Read the full White Paper here.