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Vedder Thinking | Articles SEC Finalizes Updates to Advertising and Cash Solicitation Rules


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On December 22, 2020, the U.S. Securities and Exchange Commission finalized a new “Marketing Rule” under the Investment Advisers Act of 1940 that overhauls the traditional Advertising Rule under Rule 206(4)-1 and the Cash Solicitation Rule under Rule 206(4)-3. The new Marketing Rule represents a significant change to how investment advisers can market themselves and their products, including how advisers to private funds such as private equity, venture capital and hedge funds can present their performance information. The SEC also has made related amendments to Form ADV, the investment adviser registration form, and Rule 204-2, the books and records rule.

As summarized in the corresponding press release (found here), the new rule merges the Advertising Rule and the Cash Solicitation Rule and replaces the traditional broadly drawn limitations with principles-based provisions designed to accommodate the continual evolution and interplay of technology and advice. The staff of the Division of Investment Management will withdraw decades of no-action letters and other guidance addressing the application of the Advertising and Cash Solicitation Rules, as those positions are either incorporated into the final rule or will no longer apply. A list of such letters will be available on the SEC’s website.

The new Marketing Rule was adopted with a number of modifications from the proposed rule published in November 2019. Important differences from the proposal include:

  • not expanding the definition of advertisements to one-on-one communications
    internal review and written approval of advertisements is not required prior to dissemination
  • no separate requirement for performance advertisements used with retail versus non-retail clients, and
  • loosening of the requirements for advertisements to display predecessor performance

The Marketing Rule, amended books and records rule, and related Form ADV amendments will be effective 60 days after publication in the Federal Register. The SEC has adopted a compliance date that is 18 months after the effective date to provide a transition period to comply with the amendments.

Attorneys in Vedder Price’s Investment Services Group have prepared a more detailed summary of the Marketing Rule, which is available here.


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