The SEC may soon offer more guidance on the marketing rule registered investment advisers have complained about since the rule was updated in 2021.
The SEC “has been doing a lot of outreach” about the controversial marketing rule and “engagement has increased” during the past year, Natasha Vij Greiner, director of the SEC’s Division of Investment Management (DIM) said during an appearance at the Investment Adviser Association’s (IAA) Compliance Conference March 7 in Washington, D. C.
DIM released an updated FAQ in February 2024 about the rule, which was passed in 2021 and went into effect in 2022, but “the industry is still grappling with the rule,” Greiner admitted.
The DIM is working on FAQs related to two key factors related to marketing or advertising statements about performance. “The net performance requirements as it relates to abstracted performance and certain portfolio characteristics,” Greiner said.
The two new FAQs are designed to clarify questions created by a 2023 FAQ that, among other things, raised concerns among RIAs by interpreting the rule to say adviser advertisements must present the performance of individual accounts on a net basis.
The new FAQs would address that and other issues IAA members have raised with the SEC since the 2023 FAQ was published, creating “significant implementation challenges” for RIAs, according to the IAA.
The new versions represent “welcome guidance would remove impediments to advisers sharing important information with investors and reduce the risk of investor confusion,” according to a March 7 statement from the IAA. “The updated guidance would permit advisers to advertise the performance of individual investments as well as portfolio and investment characteristics on a gross basis if the net and gross performance of the entire portfolio is also included prominently in the advertisement.
The marketing rule is one of several that have raised compliance issues for funds and fund boards due to the problematic or imprecise way they describe requirements for how a fund can be named or marketed.
Greiner, who said her experience in the SEC’s Examinations division gave her a lot of exposure to the problems RIAs have in deciding what language is compliant and what isn’t, promised during her appearance at last year’s IAA conference that the DIM would offer more outreach to RIAs and work for greater clarity in the guidance it offers.
“We spend a lot of time thinking about ways we can increase transparency through our publication priorities…and provide valuable tools CCOs can use to promote compliance within their firms,” she said at the time.
She did not say during this year’s conference when she expected the SEC to publish the new FAQs.
