The SEC finally issued long-overdue updates to Rule 206(4)‑1 under the Investment Advisers Act of 1940 and to the cash solicitation rules (Marketing Rule). The Marketing Rule is a blessing to the private funds industry in that it updates the patchwork of no‑action letters and guidance that informed advertising efforts under the existing rule. It also has downsides, however, as fund managers need to holistically review their marketing practices to address certain changes, such as the requirement to give equal prominence to funds’ gross and net performance in materials. Those myriad changes were covered in a recent webinar co‑hosted by ACA Compliance Group (ACA) and K&L Gates featuring Michael S. Caccese and Michael W. McGrath, chairman and partner, respectively, at K&L Gates; and Kimberly Versace, senior principal consultant at ACA. This second article in a two-part series describes the Marketing Rule’s impact on performance information (e.g.
, hypothetical performance); social media; “layering” of disclosures; and amendments to Form ADV and the books and records rule. The first article
detailed differences between the proposed rules and the Marketing Rule; the definition of “advertisement”; seven principles governing advertisements; and testimonials, endorsements and third-party ratings. See “How the Proposed Amendments to the SEC Advertising Rule Would Affect PE Managers
” (Jan. 14, 2020).