Preparing to Comply with the SEC’s New Marketing Rule

November 4, 2022 — the U.S. Securities and Exchange Commission’s (SEC’s) new Marketing Rule compliance deadline — is closer than you think. Is your firm preparing for compliance? We outline our implementation action plan below.

Top compliance priority for 2022

The changes to the SEC’s Marketing Rule have far-reaching implications that require firms to review and revise their Form ADV, compliance manual, disclosures, policies, recordkeeping procedures, and how performance data is presented in marketing and advertising materials. The SEC has also announced an “all or nothing” approach to compliance, meaning advisers must implement the new Marketing Rule in its entirety by November 4. Prior to the November 4 compliance date, advisers must either adhere to the current Advertising Rule and all applicable no action letters, or they must comply fully with the new Marketing Rule.

Given the scope of these changes, it makes sense that marketing and advertising is the #1 priority in 2022 for GRC professionals who attended ACA’s Fall 2021 Virtual Conference.

So how is the SEC’s new Marketing Rule impacting your peers in the investment adviser community? Below we review the impact the new rule has on the industry and provide recommendations for developing an implementation plan to meet the November 4 compliance date.

Challenges and concerns with the new rule

Despite the investment adviser community’s generally warm reception of the new rule, 62% of conference attendees said they were worried about all aspects of implementing the new rule. These concerns include:

• Updating their firm’s Form ADV, compliance manual, disclosures, policies, and recordkeeping procedures
• Revisions to client-facing materials that contain performance data (gross vs. net, hypothetical, related, extracted, predecessor)
• Understanding how to apply the new Marketing Rule’s principles-based “fair and balanced” standard, specific rules for testimonials/endorsements, and/or new criteria for third-party ratings

Recommended timeline to implement the SEC’s new Marketing Rule

69% of ACA conference attendees said they were planning to start reviewing the rule and preparing for implementation in Q4 2021. With less than a year until the implementation date, firms should already be reviewing the rule’s changes and developing an implementation timeline to stay on track for November 4.

Our recommended approach for implementing the new rule involves three phases. How long each phase will take depends on your organization’s size and structure.

Phase one: Conduct a gap analysis/assessment of rule applicability

Timeframe: 1-2 months

Review the changes under the new rule and determine how they apply to the marketing and advertising communications your firm produces.

Key actions:

1. Assess the rule’s new requirements
2. Determine how the changes apply to your firm
3. Review how your firm is presenting performance: what types of performance are you currently showing?

Phase two: Collaborate on changes

Timeframe: 4-12 months

Determine the relevant parties to include in implementing the necessary changes.

Key actions:

1. Determine updates to performance metrics and presentation:
   • Based on gaps identified, determine any new calculations for performance
   • Consider implications with the Global Investment Performance Standards (GIPS^®)
2. Determine updates to testimonials, endorsements, and third-party ratings:
   • Decide whether your firm will take advantage of the new flexibility with the amended Marketing Rule
   • Consider direct and indirect communications
   • Review placement agent and solicitor agreements if applicable
3. Draft changes to your firm’s policies and procedures

Phase three: Implement revised procedures and materials

Timeframe: 4-12 months

Implement changes, revise and publish new materials, and make other changes necessary to comply by November 4.

Key actions:

1. Implement changes to your firm’s marketing review process and documentation retention process
2. Provide training to employees on the revised rule and changes to your firm’s policies and procedures
3. Revise and publish new materials and establish expiration dates for existing materials
4. Disclose in Form ADV
5. Adjust policies, procedures, and documentation as regulatory guidance and best practices evolve

SEC Marketing Rule Resources

Visit our resource center or subscribe to receive our latest insights and guidance on the SEC’s new Marketing Rule.

Listen to our webcast: SEC Marketing Rule Preparation Timeline

How we help

ACA is your go-to-partner for compliance, performance, and technology to help your firm implement changes, review policies and materials, and manage your marketing review process to comply with the SEC’s new Marketing Rule by November 4, 2022.

Our Marketing Rule Gap Analysis can help your firm assess the gaps between your firm’s current marketing and advertising practices and the new Marketing Rule. This service includes:

• Customized training covers and defines many of the key definitions and notable changes.
• Review marketing practices, materials, and policies and procedures to identify areas that may require changes.
• Review and classify performance metrics under hypothetical, extracted, predecessor/portable, and related performance categories.
• Receive a summary report and project plan for implementing the new rule.

For firms that may have already completed that initial phase and are looking for assistance in implementing applicable changes, we can assist firms work through those identified gaps.

If you have any questions about the new Marketing Rule or how we can help your firm prepare to implement the new rule, please reach out to your ACA consultant or contact us below.

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