S3:E6 | Marketing Rule Master Class Episode 1 - Background and Observations on the New Rule | Compliance in Context

Welcome back to Compliance In Context podcast! We are incredibly pleased to announce the release of our new master class series on the new SEC Marketing Rule! In our first episode of the master class, you’ll hear from our co-hosts, Patrick Hayes, Calfee and Carlo di Florio, ACA Group along with our industry panelists from the SEC, Steven Levine and Chris Mulligan, as we provide background on the new SEC Marketing Rule and why it was developed. We’ll cover key nuances to the rule, the founding principles behind the rule, and feedback that the SEC has received from the industry. We’ll also explore how the Division of Examinations has prepared to examine for the new rule and lessons learned from early adopters. With just three months until the compliance date for the new rule, this series is the perfect master class to set you and your firm up for success. Listen and enjoy! 

Show

Interview with Steven Levine and Chris Mulligan

• 2:30: Motivation for the new SEC Marketing Rule
• 8:00: Fundamental principles
• 10:49: Key Nuances and FAQs
• 20:00: Feedback from the industry
• 23:11: Impact of comment letters
• 28:13: Impact of the new rule on SEC Examinations
• 32:47: Review of policies and procedures during examinations
• 48:00: Application to compliance programs

Quotes

03:13 – “The existing regulatory regime that we were working with was potentially a bit dated. The advertising rule that was in existence before this most recent rule adoption, was adopted in 1961. So we were dealing with an advertising rule from 1961 and there was a cash solicitation rule that was adopted in 1979. Decades have gone by since those rule adoptions.” – Steven

04:33 – “One of the motivators for this most recent marketing rule was to put everything in one place. Eliminate the system that we currently had where there were a bunch of pieces of relief all over the place and just codify everything at the commission-level into a single rule. The hope there is that everyone would be on the same page in the industry as to what the guideposts are for operating at this space.” – Steven

13:00 – “And that FAQ basically says that an advisor may–but is not required–to comply with the new marketing rule in advance to the new compliance date. However, if an advisor chooses to comply with any part of the new marketing rule, it must shift it’s compliance program over too. Basically, it must comply with all of the rule, not only part of it.” – Steven 

18:30 – “In order to demonstrate to the SEC staff that a particular advertisement complies with the rule, pointing to a no-action letter is no longer an acceptable way to do that. There has to be something within the rule itself or be adopting release that justifies the underlying content that is being questioned.” – Steven

32:47 – “I think any tips I could give is, start with your policies and procedures. Start with your policies and procedures. That’s where we’re going to look at first, right? You have to, at least, acknowledge, like, we’re going to want to know that you’ve acknowledged that the world has changed and there’s a new rule, right? And that is kind of expressed through your policies and procedures.” – Chris

49:37 – “I would encourage people to read the new rule as a standalone piece of regulation and really digest it as a standalone thing. Right now it might be very complicated for people to try to piece together, ‘Well this is what the old regulatory regime was. Let me see how it ties into the new regulatory regime. People might be drawing arrows all over the place to see what lines up with what.” – Steven