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Regulation and Compliance > Federal Regulation > SEC

SEC Ad Rule Published in Federal Register, Setting Effective Date

By Melanie Waddell

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What You Need to Know

  • The rule becomes effective May 4.
  • Industry officials had wondered if the SEC would voluntarily comply with Biden's regulatory freeze.
  • The rule, approved in December, allows advisors to use testimonials.

The Securities and Exchange Commission’s final rule on registered investment advisors’ advertising and marketing practices was published in the Federal Register Friday — setting in motion a May 4 effective date.

RIAs have 18 months to come into compliance with the new rule.

The SEC passed the ad rule changes in late December. The rule allows advisors to use testimonials and endorsements, which include traditional referral and solicitation activity, subject to certain conditions.

The amendments create a merged rule that will replace both the current advertising and cash solicitation rules.

Karen Barr, president and CEO of the Investment Adviser Association, told ThinkAdvisor Friday in an email that publication “means the rule won’t be delayed for further review, and investment advisors now have a firm compliance deadline of Nov. 4, 2022,” with 18 months to modernize their marketing and advertising programs.

John Baker, a lawyer with Stradley Ronon in Washington, told ThinkAdvisor Friday in an email that publication of the rule in the Federal Register “should put to rest any questions as to whether the Commission was having second thoughts about the rulemaking. That always seemed unlikely, when the action was unanimously approved.”

Industry officials had wondered if Gary Gensler, President Joe Biden’s pick to be the next SEC chairman, would voluntarily follow Biden’s recent regulatory freeze directive, as independent agencies like the SEC are exempt from it.

The rule replaces the current advertising rule’s “broadly drawn limitations with principles-based provisions designed to accommodate the continual evolution and interplay of technology and advice,” and includes tailored requirements for certain types of advertisements.

The SEC also adopted related amendments to the investment advisor registration form and to the books and records rule. Form ADV was also amended to require advisors to provide additional information regarding their marketing practices to help facilitate the SEC’s inspection and enforcement capabilities.

See: How to Leverage SEC’s Game Changing New Ad Rule: Samantha Russell

Melanie Waddell

@Think_MelanieW

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