(Washington)

Sneaking in right after Christmas and just before a change of administration, the SEC has announced an important rule change that affects all advisors. In particular, the SEC has updated a rule that has not been touched in decades and was increasingly out of touch with reality. The change has to do with marketing communications, particularly those through internet channels. According to Barron’s, “The new regulation also allows financial advisors to use testimonials, endorsements, and third-party ratings to woo potential clients, as long as they meet certain conditions”. SEC chief Jay Clayton commented that “The marketing rule reflects important updates to the traditional advertising and solicitation regimes, which have not been amended for decades, despite our evolving financial markets and technology. This comprehensive framework for regulating advisers’ marketing communications recognizes the increasing use of electronic media and mobile communications and will serve to improve the quality of information available to investors”.

FINSUM: Advisors have had to tread very lightly in digital communications/advertising for years because of a high degree of uncertainty about what was permissible. This goes a long way towards making that very clear.