Everything You Need to Know About the SEC Marketing Rules Update

Feb 1, 2023 | Investment Management

It is finally happening: investment advisors now can use digital channels as a resource to promote their services, inform investors and build their brands. The SEC released a marketing rules update that regulates digital marketing practices in the investment industries with the main goal of avoiding misleading practices within this new space.

In this article, we will share all the details about this update, what it covers and how it affects both investors and investment firms. And, last but not least, we will share how TeamSlide can help investment firms stay on top of this regulation. 

What is the SEC and what does it regulate?

The SEC or securities and exchange commission is a US government entity that regulates the securities market by setting the limits for its operations, protecting investors, and monitoring exchanges. SEC aims to approach possible financial issues even before they show their true colors by providing accurate reports and monitoring exchanges in order to detect scams early on. It was launched in 1934 after the stock market had a massive crash that put every financial decision into a totally different perspective. In this unpredictable context known as the great depression, companies saw how their securities became invaluable assets within the chaos surrounding them, and there was a clear need for an entity that could prevent such downsides from happening.

With its five different divisions and 23 sections, the securities and exchange commission takes care of:

  • Monitoring and regulating activities in the securities space.
  • Coming up with specific laws, rules, and requirements for entities to follow.
  • Providing a public database for financial transparency.
  • Trying to prevent scams and setting the ground for acceptable practices within the industry.

How Does the SEC Make New Rules?

Each new SEC rule starts with a clear concept of its main implications. That rule concept later becomes a detailed proposal that will be published. During this evaluation stage, both professional views and personal opinions provided by the non-finance expert public are measured and impact the next steps. 

Based on the feedback received after sharing the proposal with the public eye, then the SEC team decides how to move forward with it. 

The new SEC marketing rules

This new SEC marketing rule launched back in 2022 addresses the existence of digital channels of information that can be used as an advertising resource, and the need for specific practices that regulate the statements within these new channels. Digital marketing is here to stay, and investment firms can easily reach target users by creating an advertising strategy that takes advantage of social media audiences, users, algorithms, and search engines. However, there’s a huge issue to address when setting the roots for any type of information exchange in the digital world: false statements and misleading practices have the potential to reach a huge amount of people in short periods of time. And this means that, in order to avoid conflicts between investment firms and investors, it is important to set detailed rules for these operations. 

The new SEC rule covers everything from the language that can be used for digital advertising to the dynamic that referral practices should follow. Based on these new requirements, it is also stated that investors should have all the information required to make a mindful decision regarding their operations. This means no incomplete information, no elephants in the room, no fine prints. 

Some of the key takeaways of the SEC marketing rules
 include: 

  • Sharing conflicts of interest is not an option, but rather a requirement.
  • Fees need to be clear and transparent
  • Advertisements cannot present facts without the proper backup information.
  • There’s no place for misleading statements or incomplete information that can lead to confusion.
  • It is prohibited to insinuate possible results without a justification.
  • Performance information should be shared in a balanced way, for example, including both gross and net performance.

How does the new SEC marketing rule affect investors and investment firms?

This new rule gives investors a new approach to their advertising strategies, including the potential to reach wider audiences and grow in different directions. Investment firms will have the chance to put their businesses online, and offer their services with terms that users can easily understand.  

However, even when this new open door has a lot of potential, it also sets pretty specific standards that investment advisors should follow in order to avoid issues. Every SEC-registered member has to adjust their own current practices to make sure that they fit this new approach, from different angles. For example, according to the new SEC marketing rule, there’s no place for outrageous promises that investors can take as an incentive to jump into a decision. They will also need to work extremely hard to take care of the accuracy of their information, by double-checking any facts, statistics, and news they might include in their content. 

The importance of updated marketing collateral

Considering the importance of providing accurate so investors can make informed decisions, advisors need to have a detailed updating process for all their marketing collaterals. Advisors need to make sure that the information they provide is not only accurate but also updated, so it doesn’t become irrelevant to potential investors. 

An outdated advertising campaign or even a presentation that presents data that is no longer accurate are assets that can ruin professional relationships within this context. This will represent a downgrade for investment firms that, instead of taking advantage of these new marketing opportunities, will receive negative results such as: 

  • Bad reviews from investors.
  • Damaged reputation.
  • Fewer referrals.
  • Legal issues.

This is why it is important for investment firms to have a clear system to update their content.

How TeamSlide helps ensure your PowerPoint slides are always updated

In particular, investors need to track and ensure that their PowerPoint slides are always accurate and up-to-date.  However, as presentations are picked apart and slides shared across organizations, the risk of breaching SEC rules grows significantly.

TeamSlide provides users with instant access to your latest PowerPoint collateral ensuring that they always have access to on-brand and accurate slides.  Further, our version control feature identifies slides that are outdated and informs the user, allowing them to review and accept updates with a click.

Learn more about our version control feature here.

In conclusion

The new SEC marketing rule has come to the scene to make sure that digital marketing is an option for investment firms to connect with investors, and build transparent relationships. However, even when the opportunity promises a lot of room to grow, it will not come without its own risks. The SEC made it very clear: investment advisors need to have both accurate statements and updated information as their main marketing asset. So, if you are reading this resolution and thinking about jumping right into your first post, make sure that you fact-check every single detail. 

Sources: 

https://www.sec.gov/investment/marketing-faq

https://www.assetmark.com/blog/guide-sec-marketing-rule?hs_amp=true

https://www.kroll.com/en/insights/publications/financial-compliance-regulation/compliance-impacts-sec-new-marketing-rule

https://www.sec.gov/files/exams-risk-alert-marketing-rule.pdf

https://www.afslaw.com/perspectives/alerts/sec-adopts-new-marketing-rule-investment-advisors

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