SEC Proposes Advertising and Cash solicitation Amendments

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SEC proposes modernizing the advertising and cash solicitation rules for investment advisers

Is a change in the air? Maybe.

The Securities and Exchange Commission (SEC) has voted to propose amendments to modernize the rules under the Investment Advisers Act that address investment adviser advertisements and payments to solicitors. Why now? And why this? The SEC intends these proposed amendments to reflect changes in technology, the expectations of investors seeking advisory services, and the evolution of the financial advisory industry’s practices.

According to SEC Chairman Jay Clayton, “The advertising and solicitation rules provide important protections when advisers seek to attract clients and investors, yet neither rule has changed significantly since its adoption several decades ago.

“The reforms we have proposed today,” he explains, “are designed to address market developments and to improve the quality of information available to investors, enabling them to make more informed choices.”

What changes are proposed to the SEC’s advertising rule?

The proposed amendments to the advertising rule would replace the current rule’s broadly drawn limitations with what the SEC calls principles-based provisions. This would permit the use of testimonials, endorsements, and third-party ratings, albeit subject to certain conditions. The amendments also would include tailored requirements for the presentation of performance results based on an advertisement’s intended audience.

What changes are proposed to the SEC’s solicitation rule?

Those proposed amendments would expand the current rule to cover solicitation arrangements involving all forms of compensation, not just cash, and subject to a new de minimis threshold. The SEC’s proposed amendments also would update other aspects of the rule, such as who is disqualified from acting as a solicitor under the rule.

How to comment on the new SEC amendments?

The public comment period will remain open for 60 days following publication of the proposal in the Federal Register. To comment:

  1. Submit electronic comments via the Commission’s Internet comment form found at www.sec.gov/rules/proposed.shtml
  2. Send an email to rule-comments@sec.gov.  Make sure to include File Number S7-21-19 on the subject line.
  3. Snail mail paper comments referencing File Number S7-21-19 to:

Vanessa A. Countryman, Secretary, Securities and Exchange Commission
100 F Street NE
Washington, DC 20549-1090

Should the rules finally take effect, you still will need to be compliant

That’s where Patrina comes in. For more than 25 years, Patrina has been helping compliance professionals like you keep track of “bad apples,” and 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 designated third-party services, our 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. Let’s talk.  

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