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‘Next Steps’ for Advertising Rule Coming: SEC Official

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The Securities and Exchange Commission’s Division of Investment Management plans to recommend “next steps” on some outstanding proposals — namely long-awaited changes to the investment advisor advertising and solicitation rule — sometime this year, according to the agency’s investment management director, Dalia Blass.

At the Practising Law Institute’s Investment Management Institute event on July 28, Blass also stated that two potential 1940 Act-registered fund structures could provide “enhanced access to private investments”: target date funds and closed-end funds of private funds.

“Target date funds could, for example, invest in private markets as a way to diversify risk and potentially enhance portfolio returns,” she said. “At the same time, private investments would be capped to 15% of the fund’s portfolio.”

As to closed-end funds, the division is reexamining whether to make those with more than 15% of assets in private investments more accessible to retail investors, she said.

Ad Rule Comments

Blass stated at the Investment Adviser Association’s compliance event in early March that the agency was still digesting the comments that have come in regarding the definition of advertising — the scope — and “the compliance review aspect of the proposal” as well as “where those two areas can present potential problems.”

The comment period on the ad rule proposal expired on Feb. 10.

Blass explained that the proposal affects “a diverse community” of investment advisors and their advertising and solicitation duties. “When you look at the community that it [the ad rule] covers, it’s an incredibly diverse community of advisors” with retail and institutional investors as clients as well as private funds and robo-advisors.

Putting the advertising rule changes together “was not an easy task,” Blass said. “It was one of the harder proposals for us to bring together,” considering the rule predated the internet as well as other market and technology developments.

SEC staffers, Blass said, are “working hard” at moving toward a recommendation based on the feedback.

SEC Commissioner Allison Herren Lee aired her concerns at the IAA event that the agency’s Advertising Rule “may rely too heavily on high-level principles,” which can lead to complaints about “regulation by enforcement” and create challenges for compliance officers.


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