August 1, 2022
The New Marketing Rule: Part 7 – Third Party Ratings
On December 22, 2020, the U.S. Securities and Exchange Commission (SEC) passed amendments to the advertising and cash solicitation rules, along with updates to other requirements for registered investment advisers. The formerly separated rules are now combined under the new Marketing Rule, Rule 206(4)-1 of the Advisers Act, made effective May 4, 2021, with a compliance date of November 4, 2022.
With less than four months until the compliance date for the new Marketing Rule, our Flash Reports will continue to cover areas RIAs will need to consider as they update their compliance program for the new regulation. This Flash Report is the seventh in that series. See the rest of our series here.
The new Marketing Rule defines third-party ratings as any rating or ranking by a) someone who is not a related person, and b) that is conducted in the ordinary course of its business. If a rating or ranking does not satisfy both criteria, it would likely be a testimonial or endorsement instead. The new rule allows firms to use third-party ratings in their marketing materials, provided that their use complies with the seven general prohibitions and provides the required disclosures.
What does this mean for me?
Although the new rule offers relief from certain restrictions, significant compliance and operational oversight will be needed to ensure all the new requirements are fulfilled.
Fairview will continue to update you with in-depth information about the impact of these changes and how your firm may be affected. The next Flash Report in this series will focus on the requirements for recordkeeping under the new Marketing Rule.
Fairview Investment Services provides comprehensive and ongoing compliance services, including comprehensive marketing and advertising review, solicitation-related consulting, and complete examination support. Contact Fairview Investment Services for additional information about maintaining your compliance program in an ever-changing regulatory environment.