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SEC Proposes Changes to the Advertising and Cash Solicitation Rules for Investment Advisers

On November 4, the Securities and Exchange Commission announced that it voted to propose amendments to modernize the rules under the Investment Advisers Act of 1940 (Advisers Act) addressing investment adviser advertisements and payments to solicitors. According to the SEC, the “proposed amendments to the advertising rule (Rule 206(4)-1 under the Advisers Act) would replace the current rule’s broadly drawn limitations with principles-based provisions,” and would permit the use of testimonials, endorsements and third-party ratings, subject to certain conditions. The proposed rule also would include tailored requirements for the presentation of performance results based on an advertisement’s intended audience.

The SEC also proposed amendments to the cash solicitation rules under the Advisers Act. The proposed amendments to Rule 206(4)-3 would expand the current rule to cover solicitation arrangements involving all forms of compensation, rather than only cash, subject to a new de minimis standard. Non-cash compensation would include directed brokerage, awards or other prizes and free or discounted services. Importantly, the proposed rule would apply to the solicitation of current and prospective investors in private funds, rather than only to the solicitation of current and prospective clients of the adviser.

The proposed amendments are published on the SEC’s website and will be in the Federal Register. The public comment period will remain open for 60 days after publication in the Federal Register

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About this Author

Mark Goldstein, Katten Law Firm, New York, Financial Law Attorney
Special Counsel

Mark Goldstein focuses his practice on advising investment advisers, mutual funds and private investment funds. Mark has more than 25 years of experience advising clients on compliance and regulatory requirements, corporate matters, and the federal securities laws. He has extensive experience advising on the formation, distribution, structuring and on-going operational aspects of a wide array of investment products, including mutual funds, private investment funds, offshore funds, funds offered to separate accounts of insurance companies as funding vehicles for variable...

212-940-8507
Richard D. Marshall, Katten Muchin, SEC Representation Lawyer, Finance Attorney, New York,
Partner

Richard D. Marshall focuses his practice on the representation of financial institutions and employees subjected to investigations by the Securities and Exchange Commission, Department of Justice, Financial Industry Regulatory Authority and state securities regulators. Rick also counsels broker-dealers, investment companies and investment advisers on regulatory issues, particularly relating to SEC and FINRA regulations. He also frequently counsels clients on compliance and risk management issues and the handling of inspections.

Rick provides extensive advice regarding possible impacts of the Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulatory rulemakings. Additionally, he provides time-sensitive advice on securities trading, ownership reporting and other investment regulations to a broad range of clients.

Prior to entering private practice, Rick worked for several years for the SEC as both a branch chief in the Division of Enforcement in Washington, DC and as a senior associate regional administrator in New York, where his staff conducted inspections of investment companies and investment advisers, and instituted enforcement actions against those entities.

212.940.8765
David Y. Dickstein, Financial Services Lawyer, Katten muchin law firm
Partner

David Dickstein represents broker-dealers, investment advisers, investment companies and hedge funds in connection with a variety of regulatory, compliance and operational matters. David regularly counsels investment advisers on registration and regulatory matters, such as the need for registration, conflict of interest disclosures, soft dollars and best execution, firm advertising and marketing, federal and state pay-to-play matters, trade allocations and personal trading. He also advises broker-dealers on registration and ongoing compliance matters, mutual fund supermarkets...

212-940-8506