SEC Marketing Rule: An Ongoing Concern for Compliance Officers

It has been nearly three years since the SEC implemented a comprehensive overhaul of marketing rules for financial advisors. However, compliance officers at wealth management firms still have lingering concerns about the effective implementation of these rules.

According to a recent annual survey conducted by the Investment Adviser Association, in collaboration with risk and compliance consulting firms ACA Group and Yuter Compliance Consulting, the SEC’s marketing rule remains a top concern for compliance officers for the third consecutive year. While only one-third of those surveyed considered the regulation to be “significantly impactful” to their firms, 41% regarded it as “somewhat impactful,” and 23% claimed it had no impact at all.

The revised rule primarily focuses on altering how wealth management firms can promote their services, including the incorporation of testimonials in advertisements, alongside introducing new record-keeping requirements. The SEC officially adopted these changes in 2020, and they were implemented last year. Notably, advertising practices have become a key area of scrutiny during the agency’s examinations of registered investment advisory firms.

Compliance officers are diligently monitoring all marketing materials, conducting thorough reviews of emails to ensure the absence of unapproved content, and regularly purging any outdated or active materials as part of their responsibilities, as revealed by the IAA survey.

Carlo di Florio, the global advisory leader at ACA Group, emphasizes the SEC’s objective to ensure that firms possess substantial evidence to support all material statements of fact.

The SEC’s marketing rule continues to be a significant focal point within the wealth management industry, prompting compliance officers to remain vigilant in ensuring strict adherence to the guidelines set forth by the regulatory body.

A recent survey conducted by the Investment Adviser Association (IAA) shed light on the key concerns and priorities of compliance officers in the financial industry. The findings revealed that chief compliance officers (CCOs) are acutely aware of the Securities and Exchange Commission’s (SEC) focus on compliance programs that meet the standards outlined in the marketing rule.

Looking ahead to 2024, it is expected that regulatory exams will delve deeper into the provisions of the marketing rule. Recognizing this, CCOs have taken proactive measures to enhance their testing and monitoring processes to ensure preparedness.

While marketing rules received significant attention, cybersecurity and electronic communications surveillance were also highlighted as top concerns for compliance officers. The ever-increasing threat of cyberattacks and the need to monitor electronic communications have underscored the importance of bolstering compliance programs in these areas.

The survey encompassed a broad spectrum of 581 investment adviser firms, providing a comprehensive overview of the industry landscape. Notably, wealth managers are also taking steps to improve their compliance programs. More than half of the surveyed firms reported having conducted or planning to conduct mock SEC exams, demonstrating their commitment to adhering to regulatory requirements.

“As new regulations and risks emerge, investment advisers are proactively enhancing their compliance programs while maintaining their core focus on compliance functions,” commented IAA CEO Karen Barr. The survey revealed an uptick in testing activities across critical areas, reflecting the increasingly demanding workload placed on compliance officers.

In a separate finding, approximately half of the advisors surveyed have successfully returned to operating from their office premises, signaling a return to pre-pandemic working arrangements.

These emerging trends underscore the industry’s dedication to staying abreast of evolving regulations and rising risks. Compliance professionals are seizing the opportunity to strengthen their programs and ensure robust adherence to regulatory standards.

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