Powered by Axios HQ
Welcome to SCA’s client news brief. We want to highlight the latest news and information in the adviser regulatory world in a brief, easy to read format. You can “go deeper” by linking to more detailed reports and articles or you can reach out to us at info@secadivsors.com. Of course, you can always contact your SCA account manager. All feedback is welcome!
Company Logo
SCA Client News Brief
By Cheryl YoungOct 14, 2021

Smart Brevity™ count: 4 mins... 1042 words

Welcome to SCA’s client news brief. We want to highlight the latest news and information in the adviser regulatory world in a brief, easy to read format. You can “go deeper” by linking to more detailed reports and articles or you can reach out to us at info@secadivsors.com. Of course, you can always contact your SCA account manager. All feedback is welcome!

1 Big Thing: How the New SEC Marketing Rule Will Impact Your Firm

Illustration of an upward arrow wrapped in bubble wrap and labeled "handle with care"

The new marketing rule is welcome by many of us who need more clarity on what we can and cannot do in marketing adviser services. There is something for everyone to like and dislike.There is more flexibility such as allowing use of testimonials/endorsements and new requirements (e.g., performance presentations)

What communications are considered marketing?

  1. Communications offering advisers’ services regarding securities to more than one person, including private fund investors

  2. Offer of new services to current clients/investors

  3. One-on-one communications where hypothetical performance is used (unless communicating with private fund investors)

  4. Endorsements and testimonials where adviser provides cash or non-cash compensation, directly or indirectly, including paid solicitors

What communications are not considered marketing?

  1. One-on-one performance, unless hypothetical performance is used

  2. Extemporaneous, live, oral communications and information in legal/regulatory filings with conditions

  3. An offer to one person if information includes hypothetical performance

Marketing Prohibitions

  1. There are now seven prohibitions

  2. It is a specific requirement that advisers are able to substantiate any factual claims to the SEC. Fair and balanced treatment of material risks and limitations is emphasized.

Additional Provisions

  1. Third party ratings are subject to additional conditions and disclosures (e.g., questionnaires from rating companies must be structured so it is easy for a favorable or non-favorable review).

  2. Significant performance presentation changes, especially for those advisers that do not claim GIPS, will require firms to compare current performance marketing to the marketing rule sooner rather than later.

  3. Disclosure of marketing practices will be required in Form ADV Part 1A.

  4. Marketing books and records requirements are expanded for performance and third party ratings.

  5. The compliance deadline is November 4, 2022. We recommend firms start the process now due to the substantial changes that may be required in marketing programs, procedures and disclosures.

The bottom line: Most advisers face significant new complexities in marketing their services, so start to prepare now. Go deeper

Steps to Prepare for the Marketing Rule Changes

An illustration of a hand checking off to-do's, each to-do is a red cross

Although the deadline is not until November 4, 2022, don’t kick the can down the road. There is a lot of work ahead of you to be ready to comply.

You can adopt the rule anytime between May 4th and November 4th, but the SEC says you must adopt the rule in its entirety, not just the parts you like.

To prepare you should:

  1. Review and update marketing policies and procedures

  2. Evaluate current marketing pieces for rule impact

  3. Assess use of compensated testimonials, endorsements, and solicitors, keeping in mind that indirect comp, such as entertainment and fee discounts, may be considered comp

  4. Train employees

  5. Update books and records

Things we are doing to help clients:

  1. Conduct a gap analysis of current marketing pieces against the new requirements

  2. Develop amended marketing policies and procedures

  3. Answer questions about the use of testimonials, endorsements and social media issues

  4. Train employees

ESG is a Top SEC Priority

Illustration of a large hand holding a tiny wind turbine

Big picture: Investor demand for Environmental, Social and Governance (ESG) strategies has been on the rise in recent years. Advisers are offering ESG options through mutual funds, private funds and SMA’s. The SEC is concerned that advisers do not have adequate ESG disclosures and disclosures don’t match investment practices.

What they're saying: The SEC issued a risk alert recently outlining their observations from adviser exams covering ESG investing. They looked at policies and procedures, investment practices and disclosures for consistency as well as oversight by compliance. The alert covers deficiencies as well as effective practices.


  • Portfolio management practices inconsistent with disclosures

  • Inadequate controls to implement, monitor and update ESG guidelines

  • Proxy voting inconsistent with investment approaches

  • Unsubstantiated claims in ESG disclosures

  • Compliance programs that don’t address ESG issues (e.g., oversight of ESG focused sub-advisers)

Effective Practices:

  • Simple, clear, precise disclosures that align with actual practice

  • Disclosure of ESG factors that can be considered alongside other factors

  • Disclosure of how investments are evaluated under global ESG frameworks

  • Policies and procedures covering ESG firm practices, specifically

  • Compliance personnel knowledgeable about the firm’s ESG practices

The bottom line: Advisers offering ESG investing should assess whether their public disclosures are accurate and consistent with internal practices. Policies and procedures should address ESG investing where relevant. Compliance oversight should be adequate and the ESG process should be documented and maintained.

Gary Gensler Confirmed as SEC Chair

The Capitol dome on top of a pill bottle

No doubt, change is coming under the new SEC chair. A preview of some of the changes are found in the recently released 2021 SEC Exam Priorities where ESG investing and risks associated with digital assets are highlighted.

Why it matters:

  • Based upon Gensler’s aggressive tactics as head of the CFTC, we can expect an increase in enforcement activity.

  • The general consensus is that private funds will be targeted and not just for fraudulent offerings. It is expected Gensler will push industry shaping cases.

  • Expect new policies and regulations for fintech, cryptocurrencies and block chain. Gensler is an expert in these areas. He did express concerns about over-regulation stifling innovation, making it likely he will try to strike a balance.

  • Other areas that are facing scrutiny: ESG investments, SPACS and unregistered family offices after the implosion of Archegos, a family office that blew up a fund after risky derivatives trading.

We hope this information is helpful. Please let us know if there is a topic you would like for us to cover by contacting us at info@secadivsors.com.

Securities Compliance Advisors, LLC provides links to other publicly-available websites for your convenience. These links have been selected because we believe they provide valuable information and guidance. The information in this e-newsletterisfor general guidance only. It does not constitute the provision of legal advice, tax advice, accounting services, or professional consulting of any kind.

To unsubscribe from future newsletters, please contact us at info@secadivsors.com. You may also contact us by phone at 929-346-7239, or by mail at157 Columbus Avenue, Suite 412, New York, New York 10023.


Anonymously tell us what you thought of this newsletter. Your responses will help us create better content for you!

Was this edition useful?

Thumbs upThumbs down

This newsletter is powered by Axios HQ.

Like this style and format? Request access to Axios HQ — the tool and templates you need for more engaging team updates.