How do you balance marketing and compliance?

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A Securities and Exchange Commission (SEC) risk alert based on the results of the Commission’s Touting Initiative focused on common marketing and compliance missteps. Those findings, according to an InvestmentNews Outside-INblog coauthored by Evan Zall, president of Longview Strategies and Lauren Caplan, senior counsel at Klavens Law Group prompted them to wonder how advisors, in an increasingly competitive and transparent marketplace, can effectively – and legally – balance the need to differentiate their firms within the confines of compliance?

What is the Advertising Rule?

It’s a given that both marketing and compliance are critical to the health of the investment landscape. The SEC’s Advertising Rule sometimes may create a narrow selection of marketing options, say the blog’s authors. But narrow doesn’t equate to prohibited. Advisers do have options and opportunity to “convey expertise and build brands in a way that promotes growth and longevity.”

Zall and Caplan cite three elements central to most marketing programs and compliance approaches that will address the Advertising Rule. These are:

1) How do you navigate client and prospect marketing?

Even in a word-of-mouth business, advisers benefit from having materials on hand that captures their unique value. However, Zall and Caplan note, marketing materials — whether they are a one-sheet highlighting a practice or specialty — may also tempt advisors to “over-highlight” performance and accolades. This is an area which the authors say can be difficult areas to navigate. The Advertising Rule is explicit in its restrictions and the SEC is particularly concerned about how advisers present past investment performance.

So in marketing to clients and prospects…truthfulness matters. Take the time to employ well-crafted disclosures that accurately net out advisory fees, avoid cherry-picking recommendations, and include detailed explanations about how performance was calculated to ensure your marketing materials comply with the Advertising Rule and applicable guidelines.

2) What does the SEC care about when it comes to media relations?

When it comes to media relations, the SEC cares about one thing: The truth. Don’t overstate it.

Reporters, journalists, bloggers, etc. can often “generate” some of your firm’s best marketing materials. An interview with a reporter or the opportunity to write an article for a well-regarded media outlet often delivers inimitable third-party credibility. The “if you’re in the newspaper/magazine/etc.” you must be real can help turn a skeptical prospect into an enthusiastic client.

It’s great to win third-party rankings, awards, or to be quoted in an article that mentions you and your firm. Being recognized, or presented as an expert is a good thing. What the SEC cares about is whether you use this content in misleading ways.

So think before you distribute third-party materials. Pay attention to how the article discusses your performance, the performance of your firm, or any potential testimonials. Consider all media coverage “advertising.” If it complies with the Advertising Rule, say Caplan and Zell, include it with the appropriate disclosures. Reprinted media coverage can be an important part of an adviser’s marketing program.

3) Do you want to be social media-compliant?

Of course you do, because going forward it’s going to be a key communications tool for connecting to the next generation of investors comprised of digital natives raised on social media.

Good news is that from the SEC’s perspective, social media is no more restricted than any other form of marketing. The SEC’s Advertising Rule requirements apply online just as they do to printed materials. So, as you would in any marketing initiative, implement appropriate processes and procedures to ensure suitable usage oversight and recordkeeping controls are preserved.

What’s not compliant social media behavior?

Online testimonials or reviews on your website or social media page. The SEC usually prohibits these. This includes users tagging the “like” button on the page of an adviser or adviser’s employee. You can, however, under certain circumstances publish public comments posted to an independent social media site, so long as the third-party site and the posted commentary are truly independent of you and your firm, and that you publish all of the unedited comments from that third-party site.

The SEC’s Advertising Rule in no way prohibits advisers from sharing insights that showcase their expertise or news about the firm on social media sites. Advisors may also engage with others over social media, so long as they steer clear of providing any recommendations or investment advice.

Marketing and compliance can respectfully coexist. Paying attention to the SEC’s guidelines can mean the difference between regulatory exposure, fines, and penalties, or safely marketing one’s firm to growth.

Is compliant marketing easy?

It can be. We’ve built a business on helping organizations stay on the “straight and narrow” efficiently and cost-effectively. So let’s talk. Call 212-233-1155 to ask about Patrina’s cost-effective and comprehensive, 8-module compliance solution, and compliant data capture, file storage, and records archiving specifically designed for the financial services community. Be smart. Be covered.

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