SEC targets marketing rule, advisor compensation, complex products in 2024

investmentnews.com:

The SEC will zero in on investment advisors’ compliance with the marketing rule, their compensation arrangements and their recommendations of illiquid or difficult-to-value assets in its examinations in 2024.

 The Securities and Exchange Commission also will place “particular examination focus” on how advisors protect clients’ personal information and the accuracy and completeness of their regulatory filings, such as Form CRS, according to the 2024 examination priorities the agency released Monday.

The marketing rule, which went into force last November, overhauls how advisors can advertise their practices, allowing them for the first time to use client testimonials and reviews and updating rules to reflect social media marketing.

The SEC said it would be looking at how advisors adopt and implement policies and procedures to comply with the marketing rule, whether they appropriately disclose marketing information on Form ADV and whether they can substantiate claims made in their ads.

“Marketing practice reviews will also assess whether disseminated advertisements include any untrue statements of a material fact, are materially misleading, or are otherwise deceptive and, as applicable, comply with the requirements for performance (including hypothetical and predecessor performance), third-party ratings, and testimonials and endorsements,” the SEC states in the exam priorities.

On compensation, the SEC will assess “alternative ways that advisers try to maximize revenue, such as revenue earned on clients’ bank deposit sweep programs; and fee breakpoint calculation processes, particularly when fee billing systems are not automated,” the priorities state.

When it comes to valuation assessments, the SEC is concerned about