SEC marketing rule has ‘fallen short’ of industry expectations
When the Securities and Exchange Commission implemented its Marketing Rule in November 2022, there was caution, but also expectation of modernization and greater flexibility.
But over a year later, a survey of SEC-registered investment advisors by law firm Seward & Kissel LLP has found new challenges for RIAs and that the rule has fallen short of “hoped for” benefits compared to the old advertising rule.
The Marketing Rule was adopted in 2020 and firms were given 18 months to prepare for its implementation, given the effect it was to have on advertising practices. But the survey of 120 RIAs has found that little has changed for many advisors in practice, although their tone has changed according to Paul Miller, the law firm’s Investment Management Group partner and co-lead author of the survey.
“Initially, there was strong support for modernizing the Rule and a cautious optimism about the potential benefits to advisors of those efforts,” he said. “But more than a year in, I mainly hear disappointment over what many view as a missed opportunity and uncertainty about what new guidance may emanate from the regulator.”
In one example from the survey results, replacing restrictive rules around the use of past specific recommendations in advertising in favor of a principles-based policy requiring a ‘fair and balanced’ approach, 70% of advisors said they had not changed their approach to this or do not such references, while just 3% had increased their usage under the new rule.
RIAs have also not generally changed their use of social media with 86% saying that the Marketing Rule has had no impact in this regard.
Meanwhile, fund managers reported a heavy compliance burden with around one third spending 50 hours or more to
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