May 13, 2021 - by Elliot Ganz. This week the LSTA hosted an informative, deep dive, into the SEC’s new rules under the Investment Advisers Act governing advertising by investment advisers and cash payments to solicitors.  The panel was moderated by Amanda Segal, a partner at Katten, who was joined by her colleagues, David Dickstein and Richard Marshall.

As a result of these amendments, a new rule— Rule 206(4)-1—more comprehensively addresses requirements and prohibitions relating to investment adviser marketing and solicitation activities.  The rule, which was passed in December 2020, became effective on May 4th.  Registered Investment Advisers (RIAs) may rely on the new rule immediately (but only if complies with all the new rule’s provisions) but have until November 4, 2022 to comply.  If an RIA does not adopt the new rules immediately it must continue to comply with the existing rules. 

Compared to longstanding SEC rules and guidance in this area, the new rule reflects an updated regulatory approach along multiple dimensions.  For example, the new rule more comprehensively addresses requirements and prohibitions relating to investment adviser marketing and solicitation activities.  The panel examined the new rule and what it means for loan market investment advisers, including (i) an amended definition of “advertisement” that captures both communications traditionally covered under the old rules but also solicitation activities (including solicitation for which non-cash compensation is paid); (ii) permission to use testimonials and endorsements, provided certain conditions are met; (iii) certain new expressly stated general prohibitions on certain advertising practices; and (iv) explicit prohibitions and guidance with respect to presentation of performance information.  The panel examined exclusions to the rule and how the new rule treats issues such specific issues as testimonials, third party ratings, endorsements, past performance, and hypothetical performance.  They discussed whether the SEC will withdraw no-action letters that related to the old rule; so far they haven’t but they likely will over time.  They also addressed the new rule’s more comprehensive disclosure requirements under ADVs and recordkeeping and ended with a few examples of what not to do in the realm of advertising and solicitation under the new rule.  A replay of the webinar and the associated presentation are available here.

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