Trivia Question❓

Which landmark legislation, passed in 1940, established the framework for regulating investment advisers in the United States, including defining who qualifies as an investment adviser?

Answer at the bottom of the newsletter

SEC Rule Changes and How They Affect RIAs

Keeping up with regulatory developments is essential for Registered Investment Advisers (RIAs) striving to build trust and serve clients effectively. Recent changes from the Securities and Exchange Commission (SEC) have brought important updates that directly impact how RIAs operate, communicate, and market their services.

A key development is the SEC’s new marketing rule, which consolidates and modernizes previous advertising and cash solicitation rules. This new rule expands the definition of “advertisement” to include testimonials, endorsements, and third-party ratings. While this update provides RIAs with greater flexibility in showcasing their expertise and client satisfaction, it also imposes stricter compliance obligations. RIAs must ensure that any advertisements, endorsements, or testimonials are fair, balanced, and include clear, prominent disclosures to prevent misleading statements.

Performance advertising is another critical area affected by these changes. The rule now allows hypothetical, extracted, and model performance to be presented—but only if specific conditions are met. RIAs must clearly outline assumptions, risks, and the relevance of any hypothetical performance figures.

Additionally, the SEC has strengthened recordkeeping requirements. RIAs must maintain detailed records of all advertisements, including any social media posts, videos, scripts, and presentations, for at least five years. This may require enhanced documentation systems and compliance oversight.

To navigate these updates effectively, RIAs should collaborate with compliance professionals to build robust policies and regularly train staff on new requirements. Staying ahead of these regulatory changes not only mitigates risk but also reinforces client trust and strengthens the firm’s reputation.

Your Advisor's Edge Team

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💡 Answer to Trivia Question:

The Investment Advisers Act of 1940.