New SEC Advertising and Solicitation Rules for Investment Advisers

Description

On Nov. 4, 2019, the SEC released proposed rule amendments that would substantially modify the Advertising Rule and the Solicitation Rule. The first substantive amendments in over 50 years, the amendments would drastically change the advertising landscape for advisers today and require increased recordkeeping practices and administrative oversight to remain in compliance. Advisers' counsel must have a firm grasp of the proposed changes.

The Advertising Rule amendment includes several structural and procedural changes that investment advisers will need to consider, including a new, broader definition of "advertisement" intended to reflect modern methods of communication. The proposed rule also explicitly extends investment advisers' obligations to include interactions with investors in pooled investment vehicles and contain a new formal requirement for advertisements to be reviewed and approved by a designated employee of an investment adviser before dissemination.

The Solicitation Rule--which regulates advisers' ability to pay cash to individuals who solicit new investors on their behalf--is amended to apply to both cash and non-cash compensation and expanded to cover solicitations of investors in private funds. It also formally requires additional conflict of interest disclosure by solicitors, broadens the category of persons that are ineligible to act as solicitors, and expands advisers' recordkeeping duties under SEC Rule 204-2 of the Advisers Act (the Books and Records Rule).

Listen as our authoritative panel discusses these and other changes anticipated under the SEC's proposed Advertising and Solicitation Rules.