According to recent articles in ThinkAdvisor.com, the Security and Exchange Commission issued a new risk alert on April 17, 2024, detailing some of the problem areas they’ve been seeing recently in exams. The SEC recently fined several RIAs for various non-compliance issues related to the Marketing Rule, which was adopted December 22, 2020.
SEC Priority Areas
Two exam priority areas this year are the Marketing Rule as well as advisors’ use of artificial intelligence, according to Natasha Vij Greiner, deputy director of the SEC’s Division of Examinations. Greiner said some firms still “have no idea that this [marketing] rule even came out.”
Be sure to check with your compliance to ensure you have addressed the following common trouble spots in case you become the subject of an SEC audit:
- Make sure all your policies and procedures are specifically spelled out and formally documented, in writing, including how you use your website and social media channels in marketing.
- If you advertise or post on social media about a third-party rating, be sure that you retain the questionnaires or survey documentation used in preparing them, as well as copies of the ads, marketing pieces or social posts themselves. If you advertise or post about performance claims or hypothetical performance claims, be sure to keep the support records that back these claims up, too.
- Additionally, make sure that your Form ADV, Part 1A states clearly and specifically that you include third-party ratings and/or performance or hypothetical performance results in your advertising, marketing and social media posts.
- When advertising performance results, benchmark index comparisons must be spelled out and include all context. Outdated market data or investment products which are no longer available must not be used, nor should you use examples that don’t match what you do for your clients.
- Make sure that any awards or accolades that are advertised or used in any marketing materials were received as stated, and that all material facts about your business are accurate in every use.
- Finally, if you use AI (artificial intelligence) at your firm, its use must be disclosed in your ADV forms, brochures and websites. The SEC has recently begun looking at this.
Sources:
https://www.thinkadvisor.com/2024/04/18/5-trouble-spots-the-sec-found-in-marketing-rule-exams/
https://www.thinkadvisor.com/2024/03/07/new-marketing-rule-ai-in-sec-examiners-crosshairs/
Lita drives and manages both Quantum and advisor marketing projects, serving as our marketing liaison with key advisors. She enjoys sharing marketing strategies and tips, helping advisors grow their practices and enhance their brands. Learn More
