Evening Brief – 07.19.23
The Securities and Exchange Commission’s Marketing Rule remains top of mind among investment advisory firms, according to the 18th annual Investment Management Compliance Testing Survey conducted by the Investment Adviser Association.
For the third year in a row the rule regulating how advisers present clients with investment advice and offerings has ranked as the “hottest” area for compliance divisions.
The rule, first adopted in December 2020, overhauled for the first time in 60 years the methods by which advisors can promote their businesses, including through the use of social media and third-party ratings.
The survey showed that 70% said it was the “hottest” compliance topic, beating out cybersecurity at 52%, and electronic communications surveillance at 35%.
The SEC started enforcing the rule in November 2022 and, as recently as June, issued a risk alert on how regulators will be reviewing compliance exams regarding the rule.
The biggest change at RIAs, meanwhile, has been changing marketing materials: Nearly 89% of respondents said their firms have amended their materials to comply with the rule.
More RIAs are also relying on social media: Slightly less than 10% of respondents said their companies have increased the use of social media, while 4.5% have decreased its use.
“The persistent dominance of the SEC’s Marketing Rule as the primary worry for investment adviser compliance officers underscores the critical need for proactive adaptation,” Carlo di Florio, global advisory leader at the ACA Group, which partners with IAA on the report, said.
The rule has gotten a lot of attention from advisors since it attempts to ensure that every communication discussing investment performance sent to one or more people is considered an advertisement under the Investment Advisers Act of 1940.
The survey was conducted by the Investment Adviser Association, the ACA Group and Yuter Compliance Consulting, and included responses from compliance professionals at 581 investment advisory firms.