In 2021, the SEC’s Marketing Rule came into law, which expanded the definition of what is classified as advertising. How can companies navigate it?
According to Confluence, the new rule allows for marketing via new channels and enhances existing disclosure requirements. In addition, it will have significant compliance impacts on advertising and cash solicitations for investment advisers registered with the SEC.
Advisers are required to adopt the entire rule at once by November 4 – however, many firms are unprepared to meet the deadline. How can companies ensure a smooth transition?
First of all, Confluence suggests that companies implement advertisement changes. The firm said, “Do not wait until the November 4 deadline to make sure advertisements are updated to meet the new rules. Make changes to advertisements along with September 30th marketing decks. This way, you will be already complying with the rule while avoiding confusion about which deck version to use and when.”
Businesses should also look to always follow their policies and procedures. Confluence highlighted that staff should always be up to speed on new rules and how to implement them. Additionally, policies and procedures also make great training tools for new hires, or anyone transitioning into a new department. For this, it is key that firms ave the appropriate resources and support in place, such as internal and external counsel and compliance consultants, to help wherever assistance is needed.
There is also a need for businesses to get specific with disclosures. Confluence remarked,” In your pitch book, consider what references get placed in the body of the deck versus footnoted at the end to make sure disclosures are “clear and prominent” and that the information is relevant and understandable to the intended audience.
“Think about explicitly showing the reader what disclosure is for what content, and title and number them clearly.”
Companies also need to become Global Investment Performance Standards compliant. In the new rule, it includes 26 references to the GIPS Standards and encourages firms to follow many of the same requirements.
According to Confluence, GIPS compliance can get you the most bang for your compliance in two key ways.
“First, completing the heavy lifting of composite creation makes complying with the marketing rule easier. Although the new Marketing Rule does not require composites, a composite will be needed to compare, justify and substantiate your use of a model account, or provide that composite or related performance.
“And second, most of your competitors likely are GIPS compliant and can check that box on RFPs. In fact, 72% of our recent webinar attendees said they were already GIPS compliant and 12% said they were “absolutely” taking extra steps to become compliant.”
Confluence also recommends keeping good records. As a best practice, businesses should keep track of the following details and have an audit trail built around the entire process.
Businesses can also automate and streamline their processes. Confluence suggested, “Many advisers choose to do all their performance work in Excel, which can be rife with accuracy, efficiency, and audit problems. In our recent webinar, 59% of attendees said they are using a combination of in-house and external solutions, and 15% are using an external solution.
“Having a system capable of managing composites can help you get into compliance with the rule faster, maintain that compliance going forward, and accommodate future changes.”
Read the full post here.
Copyright © 2018 RegTech Analyst