Three financial planning industry organizations are weighing in on a proposal that calls for marketing rules for investment advisors to be more closely aligned at both the state and federal levels.
The plan by the North American Securities Administrators Association (NASAA), the membership organization for state securities agencies, would amend four rules related to investment adviser marketing to make them more consistent with federal standards.
The CFP Board, together with the Financial Planning Association (FPA) and the National Association of Personal Financial Advisors (NAPFA), submitted a joint comment letter to NASAA in response to their request for comment on the proposed revisions.
The letter applauds the effort while reiterating the need for a harmonized federal and state-level approach.
The latest federal standard dates back to 2020 when the Securities and Exchange Commission amended its marketing rule, which is designed to comprehensively regulate investment advisers’ marketing communications. The SEC revision permits testimonials, endorsements, third-party ratings, and performance reports in investment adviser marketing provided certain regulatory standards are met.
NASAA’s new proposal would update its own rules with changes designed to make them uniform with the SEC’s current regulations.
In their letter of support, the CFP Board, FPA and NAPFA stated, “The adoption of the SEC’s modernized framework for marketing and advertising by the states will simplify and harmonize compliance requirements for investment advisers, ease regulatory burdens, create business opportunities, and minimize confusion for firms and investors.”
The groups added that by states adopting the SEC Marketing Rule, it would help harmonize business and marketing opportunities for both state- and SEC-registered investment advisers that have now been expanding to social media and short-form videos.
“While we share concerns about the risk of misinformation in testimonials, endorsements, third-party ratings, and performance advertising, the SEC Marketing Rule provides a principles-based framework and guardrails that allow them under appropriate conditions,” the letter states. “This has resulted in enforcement actions against firms that, for example, engaged in unsubstantiated claims in marketing materials or used outside testimonials and endorsements without proper disclosure. Such enforcement must continue.”
The letter also lends support for NASAA’s plan to incorporate the SEC’s language directly into state rules, rather than simply referencing the federal regulation.
“We believe the need for clarity for firms and investors, with accessible and clear language in individual state regulations, outweighs the benefits of shorter or more streamlined written requirements that simply reference the SEC Marketing Rule,” the letter states.
The organizations add that adopting the NASAA amendments would simplify compliance requirements for state-registered investment advisers. “For example, state-registered investment advisers operating in multiple states must comply with different and sometimes conflicting state regulations and administrative interpretations in each state where they do business.”
It was reported that 26 states have already revised their own rules to align with the SEC’s amendments to its marketing rule.
The attorneys at Hyman Cotter PC fully understand the regulatory scrutiny financial professionals and their firms face from the various regulators that oversee the financial services industry. Additionally, we regularly monitor SEC, FINRA and other self-regulatory organization rule-making activities to help ensure that our clients are aware of any new policies, while assisting them in implementing any recommended changes. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
