Registered Investment Adviser (RIA) SEC Marketing Rule Lawyer 

Helping Investment Advisers Capitalize On Opportunities

While Complying With The Marketing Rule

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Registered Investment Advisers (RIAs) have an immense responsibility to their clients and operate in a highly regulated space. Historically, the strategies RIAs could employ to drive new client growth were subject to strict limitations, including as per the Investment Advisers Act of 1940 (the “Advisers Act”). While there are still limitations, the Securities and Exchange Commission’s (SEC) “new” Marketing Rule (amendments to Rule 206(4)-1) changed how RIAs can market their services significantly. Specifically, the Marketing Rule supersedes and combines the previously separate “Advertising Rule” (Rule 206(4)-1) and the “Solicitation Rule” (Rule 206(4)-3).

The Marketing Rule now allows RIAs to leverage previously prohibited yet otherwise enormously effective and efficient marketing strategies. One of the most notable changes is that RIAs can now utilize testimonials (a favorable statement by a client) and endorsements (a favorable statement by a non-client) in their advertising activities. The allowance of testimonials and endorsements translates into RIAs being able to use otherwise attractive marketing strategies, particularly various kinds of affiliate marketing. 

While the Marketing Rule has made new channels for growth filled with potential possible, RIAs must ensure strict compliance when undertaking such activities. 

Subject to limited exceptions, some of the critical components for compliance under the Marketing Rule are as follows: 

• Disclosure Required –  Advertisements must clearly and prominently disclose whether the person giving the testimonial or endorsement (the “promoter”) is a client, whether the promoter is compensated, the terms of such compensation, and any material conflicts of interest. 
• Written Agreement –  An RIA that employs testimonials or endorsements must enter into a written agreement with such promoters. The agreement must describe the scope of the agreed-upon advertising activities and the terms of compensation, among other terms. 
• Oversight to Ensure Compliance – RIAs must ensure promoters comply with the Marketing Rule and implement a monitoring program.
• Anti-Fraud Provisions – Advertisements are subject to the general Anti-Fraud Provision of the Investment Advisers Act of 1940 and, for example, prohibit untrue statements of a material fact, the omission of material facts, unsubstantiated claims, and otherwise materially misleading claims. 
• Disqualification – The Marketing Rule, subject to certain exceptions, disqualifies “bad actors” from acting as promoters.
• Books & Records –  RIAs must keep records of all advertisements, including as they relate to required disclosures. 
• Amendments to Form ADV – The SEC adopted amendments that add a new subsection to Form ADV. The new subsection requires disclosure about an investment adviser’s advertisements, including but not limited to whether they have paid any cash or non-cash compensation for endorsements or testimonials. 

Other components of the SEC Marketing Rule govern a variety of additional marketing-type activities, including various types of performance marketing, such as hypothetical performance and the use of third-party ratings.

SEC Marketing Rule Enforcement Actions

• SEC Charges Fundrise Advisors, LLC for Paying Content Creators to Solicit Clients in Violation of the Cash Solicitation Rule: The SEC charged Fundrise Advisors, LLC, for violating cash solicitation rules by paying over 200 social media influencers and online publishers to solicit clients without providing required disclosures. Fundrise agreed to a $250,000 civil penalty and consented to a cease-and-desist order and censure without admitting or denying the SEC’s findings.
• SEC Charges New York-Based Registered Investment Adviser with Marketing Rule Violations: The SEC charged Wahed Invest, LLC for violating the Marketing Rule by disseminating advertisements with paid athlete endorsements lacking required disclosures and advertising hypothetical performance without proper policies. Wahed agreed to a $250,000 civil penalty, a cease-and-desist order, and undertakings to comply with the Marketing Rule without admitting or denying the findings.

RICHT’s key practice area of marketing law allows us to help clients leverage effective marketing strategies to capitalize on growth potential while maintaining compliance in heavily regulated sectors, such as with the SEC and investment advisory. 

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Investment Adviser Marketing Law Services We Offer

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