The new Marketing Rule went effective on May 4 2021, beginning an 18-month transition period for companies.
This update is aimed at modernising the rules that govern investment adviser advertisements and payments to solicitors. It creates a single rule that replaces the current advertising and cash solicitation rules, in a bid to comprehensively and efficiently regulate communications.
The new rule recognises the new technology used for communications and will allow “advisers to provide investors with useful information as they choose among investment advisers and advisory services, subject to conditions that are reasonably designed to prevent fraud.”
All advisers will need to be compliant with the changes by November 4 2022.
CSS RegTech has issued some advice to help companies with the changes. In a blog post it said, “While that [deadline] sounds like a lot of time, we encourage CCOs to start thinking about a plan because “time files in compliance.”
One of its first pieces of advice is to review and determine what changes to the firm’s policies and procedures are required. The new rule has several new definitions and requirements and it will take time to understand the extent of the changes.
Its next piece of advice is to inventory materials. This means a firm should take stock of what they currently circulate, which is deemed marketing and determine what revisions will be needed. It added, “Work closely to educate your Marketing department on the new facets of the Rule.”
Next, CSS encourages firms to determine what their position is going to be on social media. “Beyond whether the firm will participate in social media, understand the concepts of adoption and entanglement and how that might impact the marketing you will do. Also, make the decision on whether you will permit supervised persons to utilize their social media platforms for business/marketing purposes and develop the necessary policies surrounding their use.”
CSS also states companies should review and repaper their solicitation arrangements. The new rule pulls in cash and non-cash solicitation arrangements under the endorsements/testimonial portion of the Rule. This means changes will be required with existing solicitation relationships. This step will require working with external sources, so it is best to start work early, it said.
Its next recommendation is to assess performance reporting. “If you include performance data in your materials, look at how to meet the new requirements around gross and net performance, the time period presentation and relevant accounts.”
Finally, CSS states firms need to prepare their recordkeeping. The firm needs to be certain they can substantiate any claims made in their materials and that your supporting documents are contemporaneous and easily accessible.
This rule requires firms to implement the entire rule at once and there are amendments to Form ADV that must be made at the implementation date. The post said, “when picking an implementation date, think about whether it is easier for you to select the first day or a quarter or some other landmark date that will be clear in your records.”
It concluded, “The size of the challenge will vary based on the amount and type of marketing activities your firm conducts and the state of your current policies and procedures around those activities. Stating that analysis now will ensure that you address the requirements and meet the deadline. As the old saying goes, ‘plan your work, work your plan.’”
Read the full blog post here.
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