1. Marketing and Advertising Rules
Rule 206(4)-1 (the “Advertising Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”) prohibits the use of fraudulent or misleading advertising or marketing material. In order to ensure that marketing materials comply with the Investment Advisors Act’s anti-fraud rules and SEC no-action letters and guidance, investment advisors should have in place strong supervisory and compliance policies and procedures. Because the anti-fraud rules apply to all investment advisors, not just SEC registered advisors, it is important for all investment advisors to implement similar policies and procedures governing marketing materials.
Under SEC Rule 156, private fund advertisements must not contain information that is materially misleading, depending on an evaluation of the context in which statements involving material facts are made. Marketing material must include any possible risks or limitations with equal prominence as possible benefits of products or services. It must not make exaggerated or unsubstantiated claims about management skill or techniques, characteristics of the investment company or an investment in securities issued by such company, services, security of investment or funds, effects of government supervision, or other attributes. The sales literature must not make unwarranted or incomplete comparison explanations to other investment vehicles or to indices.
2. Marketing Material Defined
Marketing material is defined as any material that is intended to be distributed to more than one person that is designed to attract new clients or maintain existing clients.
|Marketing Materials Include:||Marketing Materials DO NOT Include:|
|PPMs||A document that responds to a question from a single person|
|Pitch Books||Written communication addressed to one person and intended for only one person|
|Slip Sheets||Regular account statements sent only to existing clients|
|Information on websites and social pages||Academic articles that discuss economic trends, but do not discuss the firm, its advisory services or performance|
|Press Releases, articles and speaking engagements||In person, telephone or other oral conversations|
3. Common Pitfalls
Common pitfalls with respect to marketing materials include:
The rules related to marketing materials can be complex. For this reason, all marketing materials should be reviewed by someone with knowledge and experience interpreting SEC rules and regulations in order to ensure that each marketing piece is fully compliant prior to use. If the CCO is not well versed on the Advertising Rule, marketing material should be referred to your compliance consultant for review and approval.