A survey geared towards investment adviser compliance officers found that implementing the SEC’s Marketing Rule remains their top focus for the third year in a row.
The 2023 Investment Management Compliance Testing Survey found that 70% of respondents selected advertising and marketing as the “hottest” compliance topic—an eight-point drop compared to 2022, when 78% of respondents indicated the same.
Additional hot topics in 2023 included cybersecurity at 52%, and electronic communications surveillance at 35% of total respondents.
Other key areas aligned with the SEC’s exam, enforcement, and rulemaking priorities, including ESG and sustainability; conflicts of interest; fee calculation and billing/expenses; private funds regulation; digital assets; insider trading; and valuation.
Top focus areas on recent SEC exams also included marketing in first place, followed by books and records; conflicts of interest; fees and expenses; and code of ethics.
The survey was fielded by the Investment Adviser Association, the ACA Group and Yuter Compliance Consulting, and included responses from compliance professionals at 581 investment advisory firms.
The marketing rule has remained a top focus for compliance professionals since its adoption by the SEC in 2020, when the government agency voted to modernize rules that govern investment adviser advertisements and payments to solicitors under the Investment Advisers Act.
When asked which policies and procedures were updated due to the new marketing rule, top responses included:
- We removed our prior marketing policy and adopted a new policy to comply with the new marketing rule (47%).
- We revised our existing marketing policy to comply with the new marketing rule but did not adopt a completely new marketing policy (37%).
- We included a hypothetical performance policy within our marketing policy (24%).
- We removed our prior cash solicitation policy and incorporated our policy on endorsements in our marketing policy (23%).
- We revised the hypothetical performance policy we already had in place (13%).
Comparably, when asked which procedures were added because of the marketing rule, 67% said they started reviewing marketing materials, 45% began training, and 40% added recordkeeping. Another 40% listed performance calculations, and 37% added performance-related recordkeeping.
Lastly, respondents listed the controls arranged with respect to marketing and advertising activities. Top controls included were:
- Designated individual(s) are responsible for reviewing all advertisements for compliance with our policies and procedures (78%).
- Marketing materials are logged and tracked as they are prepared (56%).
- Adopted and implemented recordkeeping policies and procedures relating to our advertising/marketing practices (53%).
- Compliance pre-approves marketing/advertising activities in new geographic jurisdictions (42%).
- Compliance approves all third-party solicitation engagements (40%).
Additional insights from the report can be found here.
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Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
