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