Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Navigating the SEC's Marketing Rule: Compliance Challenges and Legal Insights
In 2020, the SEC formalized Rule 206(4)-1 (the Marketing Rule) under the Investment Advisers Act of 1940 (the Advisers Act) with the goal of codifying the multiple sources of guidance and case law that had accumulated over the years regarding the promotion of services under the previous regime. Since its implementation, investment advisers have faced challenges due to the regulation's ambiguity. Despite the Staff's initial release of a two-item FAQ to clarify the adoption time frame and reporting period for the Marketing Rule, many substantive questions remained well after the November 2022 compliance date.
|Who Is Impacted?
Registered Investment Advisers (RIAs) are directly impacted by the Marketing Rule. The Advisers Act defines investment advisers as any person or firm that is engaged in the business of providing advice to others or issuing reports or analyses regarding securities for compensation. The Marketing Rule sets standards for how RIAs market their services, including presenting performance data, substantiating claims and ensuring advertisements are "fair and balanced."
Key questions that arose in the industry following the adoption of the Marketing Rule included:
|- Can firms present gross performance for a single investment if net performance for the entire portfolio is also shown?
- What practical criteria does the SEC expect to meet the "fair and balanced" standard in advertisements?
- What types of evidence are needed to substantiate both express and implied claims?
Questions in the industry surrounding the presentation of gross and net performance led the Staff to update the FAQ again in 2023 and 2024. These updates clarified that net performance advertising must be presented in all circumstances, including for single asset investments. They also specified that gross and net performance must be calculated using the same time frame and methodology and highlighted the importance of accurately calculating an internal rate of return (IRR) when subscription lines of credit are used. See, SEC Marketing Compliance Frequently Asked Questions (Feb. 6, 2024).
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
'Huguenot LLC v. Megalith Capital Group Fund I, L.P.': A Tutorial On Contract Liability for Real Estate Purchasers
In June 2024, the First Department decided Huguenot LLC v. Megalith Capital Group Fund I, L.P., which resolved a question of liability for a group of condominium apartment buyers and in so doing, touched on a wide range of issues about how contracts can obligate purchasers of real property.
The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies
Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
CoStar Wins Injunction for Breach-of-Contract Damages In CRE Database Access Lawsuit
Latham & Watkins helped the largest U.S. commercial real estate research company prevail in a breach-of-contract dispute in District of Columbia federal court.
