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Alternative Market Briefing

SEC pitches huge advertising and cash solicitation rules overhaul

Thursday, November 07, 2019

Laxman Pai, Opalesque Asia:

The U.S. Securities and Exchange Commission (SEC) voted to propose a set of amendments meant to modernize the advertising rules and restrictions applying to advisers under the Investment Advisers Act.

According to SEC Chair Jay Clayton, the proposed amendments are intended to update the advertising rules to reflect changes in technology, the expectations of investors seeking advisory services, and the evolution of industry practices.

The first rule, which relates to advertisements and would replace a rule adopted in 1961 that has not substantively changed since, would "replace broadly drawn limitations with principles-based provisions," according to an SEC statement.

It would include general prohibitions of some advertising practices with "more tailored restrictions and requirements that are reasonably designed to prevent fraud." The approach allows for the use of testimonials, endorsements, and third-party ratings, as well as "the presentation of performance with tailored requirements based on an advertisement's intended audience."

"The advertising and solicitation rules provide important protections when advisers seek to attract clients and investors, yet neither rule has changed significantly since its adoption several decades ago," said Clayton. "The reforms we have proposed today are designed to address market developments and to improve the quality of information available to investors, enabling them to make more informed choi......................

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