State securities regulators want to align state-specific rules with the federal marketing rule.
The North American Securities Administrators Association (NASAA) requested public comments on proposed amendments to four rules related to advisor advertising, which are due by Aug. 28.
NASAA President Leslie Van Buskirk said the amendments help “provide a model for updates to state investment advisor advertising rules based in part on changes made by the SEC to marketing rules for SEC-registered advisors.”
The SEC passed its updated version of the federal advisor ad rule in 2020, with the final compliance date in late 2022. The rule dictates when and how advisors can use testimonials and endorsements in advertising and the kind of portfolio performance metrics firms can use when selling their services. In particular, it curtails how advisors could use hypothetical performance in ads.
The commission brought its first enforcement actions related to the rule in August 2023, and according to the Investment Adviser Association (IAA), it’s continued to be top-of-mind for compliance professionals. During the IAA’s annual conference last March, SEC staff announced they’d likely publish two new FAQs on the ad rule “in the near future,” addressing the use of net vs. gross performance in advertisements.
Related:Texas Offers Guidance on Advisors Using Fintech Tools to Access Held-Away Account Data
In the rule, NASAA asks commenters to consider whether the state model rule should remove the current ban on testimonials, endorsements, third-party ratings and other kinds of performance advertising (which are allowed with prohibitions in the SEC rule).
The association also asked commenters whether compensating individuals for ads constitutes “solicitation” (with all the state rules that go along with it) and whether the model rule should use the same “de minimis” amount of $1,000 used by the SEC when considering payment for testimonials or if the amount should be left blank for states to tailor.
In recent months, NASAA approved changes to match its model conduct rule with the SEC’s Regulation Best Interest, including adding a best interest duty of care for retail clients’ investment recommendations, and also prohibiting broker/dealers from using potentially misleading titles like “adviser” or advisor.”
Last month, state regulators settled charges with several big-name b/d firms, including Edward Jones, LPL Financial, RBC, Stifel, and TD Ameritrade, alleging they charged unreasonable commissions on small-dollar trades (the firms collectively agreed to pay over $9.3 million). The association also recently urged Congress not to cut state regulators out of crypto enforcement as legislators continue to craft market structure bills.
Related:DOJ: California Advisor Ran $9.5M Ponzi Scheme For Decades
NASAA Seeks Comments on Aligning State Advisor Ad Rules with SEC
State securities regulators want to align state-specific rules with the federal marketing rule.
The North American Securities Administrators Association (NASAA) requested public comments on proposed amendments to four rules related to advisor advertising, which are due by Aug. 28.
NASAA President Leslie Van Buskirk said the amendments help “provide a model for updates to state investment advisor advertising rules based in part on changes made by the SEC to marketing rules for SEC-registered advisors.”
The SEC passed its updated version of the federal advisor ad rule in 2020, with the final compliance date in late 2022. The rule dictates when and how advisors can use testimonials and endorsements in advertising and the kind of portfolio performance metrics firms can use when selling their services. In particular, it curtails how advisors could use hypothetical performance in ads.
The commission brought its first enforcement actions related to the rule in August 2023, and according to the Investment Adviser Association (IAA), it’s continued to be top-of-mind for compliance professionals. During the IAA’s annual conference last March, SEC staff announced they’d likely publish two new FAQs on the ad rule “in the near future,” addressing the use of net vs. gross performance in advertisements.
Related:Texas Offers Guidance on Advisors Using Fintech Tools to Access Held-Away Account Data
In the rule, NASAA asks commenters to consider whether the state model rule should remove the current ban on testimonials, endorsements, third-party ratings and other kinds of performance advertising (which are allowed with prohibitions in the SEC rule).
The association also asked commenters whether compensating individuals for ads constitutes “solicitation” (with all the state rules that go along with it) and whether the model rule should use the same “de minimis” amount of $1,000 used by the SEC when considering payment for testimonials or if the amount should be left blank for states to tailor.
In recent months, NASAA approved changes to match its model conduct rule with the SEC’s Regulation Best Interest, including adding a best interest duty of care for retail clients’ investment recommendations, and also prohibiting broker/dealers from using potentially misleading titles like “adviser” or advisor.”
Last month, state regulators settled charges with several big-name b/d firms, including Edward Jones, LPL Financial, RBC, Stifel, and TD Ameritrade, alleging they charged unreasonable commissions on small-dollar trades (the firms collectively agreed to pay over $9.3 million). The association also recently urged Congress not to cut state regulators out of crypto enforcement as legislators continue to craft market structure bills.
Related:DOJ: California Advisor Ran $9.5M Ponzi Scheme For Decades
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