The SEC’s 2019 regulatory agenda includes amendments to adviser marketing rules. The SEC will consider Rule 206(4)-1, the general advertising rule that prohibits fraudulent statements and specifically limits testimonials, past specific recommendations, and “black box” claims. The SEC will also re-visit Rule 206(4)-3, which regulates the payment of cash solicitation fees to third parties. Last year, the SEC took action on 23 of the 26 rules on its regulatory agenda.
Presumably, this rulemaking review has arisen from last year’s sweep whereby OCIE reported widespread marketing violations including misleading performance claims, cherry-picking results, the use of past specific recommendations, and improper claims of GIPS compliance. The rules haven’t really changed much in several decades, so a re-boot makes some sense. We recommend that the SEC consider specific standards rather than relying on a general anti-fraud rule.