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Vedder Thinking | Articles SEC Staff’s Latest Risk Alert Highlights Additional Focus Areas for Compliance with the Adviser Marketing Rule


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On June 8, 2023, the SEC’s Division of Examinations issued a risk alert highlighting certain additional areas of emphasis for upcoming examinations focused on marketing rule, which took effect on November 4, 2022 and replaced the previous advertising and cash solicitation rules under the Advisers Act.  The risk alert follows a September 19, 2022 publication in which the SEC staff initially identified focus areas for examinations relating to the new marketing rule. 

In its latest risk alert, the Division’s staff notes that it will continue to focus on areas previously identified in the earlier risk alert, including the implementation of policies and procedures reasonably designed to prevent violations of the marketing rule, the rule’s substantiation requirement, compliance with the rule’s performance advertisement requirements and related books and records requirements.

Continuing Review for Compliance with the General Prohibitions  

The staff also noted that, as a component of examinations including a review of advisers’ marketing practices, the Division will continue to focus on compliance with general prohibitions, such as making an untrue statement of a material fact, or omitting a material fact necessary to make the statement made, in light of the circumstances under which it was made, not misleading.  

Other general prohibitions include:

  • Including a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate upon demand by the SEC; 
  • Including information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the adviser;
  • Discussing any potential benefits to clients or investors connected with or resulting from the adviser’s services or methods of operation without providing fair and balanced treatment of any associated material risks or limitations;
  • Referencing specific investment advice provided by the adviser in a manner that is not fair and balanced; 
  • Including or excluding performance results, or, presenting performance time periods, in a manner that is not fair and balanced; or 
  • Including information that is otherwise materially misleading. 

 Additional Marketing Rule Areas of Emphasis

The risk alert signaled that the other aspects of the marketing rule subject to SEC staff scrutiny generally relate to testimonials and endorsements, third-party ratings and Form ADV disclosures, as follows:

· Testimonials and Endorsements.  The staff is reviewing whether advisers are in compliance with requirements regarding the use of testimonials and endorsements, including whether:

  • disclosures are provided, including clear and prominent disclosure of whether the person giving the testimonial or endorsement is a client or investor, that the promoter is compensated, if applicable, and of material conflicts of interest;
  • oversight conditions are met, such as whether advisers have a reasonable basis for believing that the testimonials or endorsements disseminated comply with the rule’s requirements; 
  • written agreements are entered into, where required, such as written agreements with promoters (subject to certain limited exceptions under the rule); and
  • ineligible persons (e.g., “bad actors”) have been compensated for testimonials or endorsements (subject to certain limited exceptions under the rule).

· Third-Party Ratings.  The staff is reviewing whether advisers are in compliance with the rule’s requirements regarding the use of third-party ratings in advertisements, including whether:

  • the adviser provides, or reasonably believes that the third-party rating provides, clear and prominent disclosure of: (i) the date on which the rating was given and the period of time upon which it was based; (ii) the identity of the third party that created and tabulated the rating; and (iii) if applicable, that compensation has been provided directly or indirectly by the adviser in using or obtaining the rating.
  • questionnaires or surveys used in preparation of a third-party rating meet certain conditions, such as that the adviser has a reasonable basis for believing that it is structured to make it equally easy for a participant to provide favorable and unfavorable responses, and not in a way that would produce any predetermined result.

· Form ADV.  The staff is reviewing whether advisers accurately completed the new subsection to Item 5 of Form ADV Part 1A regarding the adviser’s marketing activities in connection with annual updating amendment filings.  

The SEC staff encouraged investment advisers to assess their practices, policies and procedures in light of the additional examination review areas and, as necessary, to implement appropriate modifications to training, supervisory, oversight and compliance programs.  

The risk alert is available here.


Nathaniel Segal


Jacob C. Tiedt


Kwashay (Shay) Wilkerson