The SEC Marketing Rule, formally known as Rule 206(4)-1 under the Investment Advisers Act of 1940 (the Advisers Act), outlines the rules for investment adviser advertising and solicitation practices.
The SEC Marketing Rule prohibits the following practices in advertisements:
- Making untrue statements of material fact.
- Making statements that are otherwise false or misleading.
- Including information that could be reasonably interpreted as a guarantee of future performance.
- Making misleading statements about compensation or fees.
- Cherry-picking favorable past performance results without providing fair and balanced context.
Investment advisory firms need to adopt and implement written policies and procedures reasonably designed to prevent violations. Ensure written policies are not generic and instead are customized to reflect actual business practices when it comes to advertising.
Definition of Advertisement
The SEC Marketing Rule expands the definition of an advertisement to include:
- Any direct or indirect communication by an investment adviser offering its services to prospective clients or investors.
- Communications to existing clients that offer new investment advisory services or new investments in a private fund advised by the adviser.
Additional Resources