Norm Champ, Director, SEC Division of Investment Management, recently noted that SEC rules prohibit certain advertisements by registered advisers. See our analysis here of SEC guidance on advertisements by hedge fund and private equity sponsors.
Mr. Champ noted the SEC has heard from advisers to private funds, particularly advisers to private equity funds, about the difficulties of applying the specific prohibitions on testimonials and past specific recommendations to their business models. He stated the staff is considering issues raised by private fund advisers regarding the advertising rule and considering what action, if any, should be taken or recommended to the Commission.
Mr. Champ stated “in the meantime, advisers should be sure to provide clear, complete and accurate disclosure in their advertising, particularly with respect to performance.” He also advised funds should:
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Review marketing documents to ensure information is truthful, accurate and not misleading.
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Adopt, and periodically review the effectiveness of, compliance policies and procedures covering advertisements and other types of communications.
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Be aware that marketing is one area that the Office of Compliance, Inspections and Examinations had highlighted as a higher-risk area of the business and operations of many advisers. It is also one of the areas of focus of OCIE’s Presence Exam initiative.
Finally, Mr. Champ discussed the JOBS Act. He stated his staff is working closely with staff from the Division of Corporation Finance on a proposal to amend Regulation D to permit advertising and general solicitation as long as all purchasers are accredited investors and the issuer has taken reasonable steps to verify their accredited status. According to Mr. Champ, SEC Chairman Walter has identified rulemakings required under the JOBS Act as a priority, and the staff is carefully reviewing comments and considering what recommendations to make to the Commission, taking into account Congressional intent as well as investor protection concerns.
Check dodd-frank.com frequently for updated information on the JOBS Act, the Dodd-Frank Act and other important securities law matters.
