SEC Finalizes Digital Advertising Rule Reforms

The SEC’s leadership says the updated marketing rule reflects important changes to the traditional advertising and solicitation regulations, which have not been amended for decades.

After more than a year since it put forward a proposal on the topic, the U.S. Securities and Exchange Commission (SEC) has finalized key reforms under the Investment Advisers Act to modernize the rules that govern investment adviser advertisements and payments to solicitors.

The finalized amendments create a single rule that replaces the current advertising and cash solicitation rules. According to the SEC’s leadership, the final rule is designed to comprehensively and efficiently regulate investment advisers’ marketing communications. They say the reforms will allow advisers to provide investors with useful information as they choose investment advisers and advisory services, subject to conditions that are reasonably designed to prevent fraud.

“The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology,” says Chairman Jay Clayton. “This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors. The new rule provides for an extended compliance period intended to provide advisers with a sufficient transition period, including to enable consultation with the commission’s expert staff.”

The finalized rule will soon appear in the Federal Register. According to a fact sheet published by the SEC, the rule replaces the previous advertising rule’s broadly drawn limitations with principles-based provisions designed to accommodate the continual evolution and interplay of technology and advice. The final framework also includes tailored requirements for certain types of advertisements. For example, the rule will require advisers to standardize certain parts of a performance presentation in order to help investors evaluate and compare investment opportunities, and it will include tailored requirements for certain types of performance presentations.

According to the fact sheet, advertisements that include third-party ratings will be required to include specific disclosures to prevent them from being misleading. The rule also will permit the use of testimonials and endorsements, which include traditional referral and solicitation activity, subject to certain conditions.

In addition to these developments, the SEC adopted related amendments to the investment adviser registration form and the books and records rules. The staff of the Division of Investment Management also expects to withdraw various no-action letters and other guidance addressing the application of the advertising and cash solicitation rules. A list of the letters will soon be available on

As was the case with the proposed version of the modernized advertising rule, the initial adviser industry response to the final version has been positive. One of the first reactions comes from Investment Adviser Association (IAA) President and CEO Karen Barr.

“The IAA applauds the SEC and its staff for all their hard work on this modernization of the advertising rule—its first major overhaul since it was first adopted nearly 60 years ago,” Barr says. “We are pleased that the commissioners and staff incorporated a number of requests made by the IAA, including permitting advisers to market themselves through social media and other modern means. We appreciate that the rule includes a targeted definition of advertising that allows advisory firms to continue their typical communications with existing clients. We are also pleased that the SEC focused on the compliance program requirements in lieu of the proposal requiring pre-approval of all marketing materials.”

Barr says the SEC’s latest rulemaking represents “a significant improvement over the current regulatory regime,” adding that the IAA looks forward to working with the SEC staff through the implementation period.