SEC Examination Requests Regarding New Marketing Rule Compliance

July 11, 2023

What happened? 

The SEC has begun requesting more information in exams to assess compliance with the new Marketing Rule. In one recent exam, the SEC requested the following information for activities during the exam period:

• Advertising Records: An inventory of advertisements (or a third-party on behalf of the firm), including: brochures, websites, pitch books, pamphlets, performance presentations (other than client-specific ones), blogs and social media, and mass emails or form letters;
• RFPs, DDQs and Databases: List of companies for which the firm completed RFPs, DDQs, and any other questionnaires, such as a third-party consultant data base or other performance database, and samples of these responses;
• Sponsored Events and Attended Events: List of all sponsored events for which attendees or prospective attendees were given the firm’s marketing materials, and whether a recording of the event was provided to the firm’s clients or investors; list of all events at which the firm presented marketing materials; whether a recording was provided to the firm’s clients or investors; and whether new clients or investors were recruited through the event;
• Public Audio and Video: List of live or pre-recorded broadcasts online, on television, in podcasts or otherwise that the firm or its supervised persons participated in, along with other requested details, such as whether prepared remarks were used and what materials were distributed or shared with the audience;
• Prospective Client/Investor Presentations: Information about all presentations to clients/investors that were not related to existing accounts or investments, including information about the types of performance presented and description of the presentation’s audience; and
• Testimonials and Endorsements: A list of compensated promoters, including information about the details of the compensation, the promoters’ affiliations with the firm, and the specific clients or investors referred by the promoter.

 

What does this mean for me?

The SEC published a Risk Alert in June announcing additional areas of the new Marketing Rule that the Division of Examinations would focus on (see our prior coverage here).  These new requests and the broad scope would allow for examination of compliance with performance advertising, the general prohibitions, testimonials and endorsements, and third-party ratings.  Additionally, the specific requests on types of communication such as questionnaires from third parties, one-on-one presentations to prospective clients, and public presentations like podcasts would allow examiners to observe how firms are applying the new definition of “advertisement,” and whether policies and procedures accurately address these types of communication.

Fairview provides comprehensive and ongoing compliance services, including comprehensive marketing and advertising review and complete examination support.  Contact Fairview Investment Services for additional information about maintaining your compliance program in an ever-changing regulatory environment.