SEC Announces Five More Settlements From Marketing Rule Sweep

Advisers can’t claim they haven’t been warned. Since its effective date in November 2022, the SEC has let firms know that it would be closely monitoring compliance with the new Advisers Act Marketing Rule (Rule 206(4)-1).  The Division of Examinations (EXAMS) has issued two risk alerts, Examinations Focused on the New Investment Adviser Marketing Rule and Examinations Focused on Additional Areas of the Adviser Marketing Rule, along with the announcement of settlements with nine advisers in September 2023. Most recently, the SEC announced settlements with five more firms, finding that the advisers posted hypothetical performance on their websites “without adopting and implementing policies and procedures reasonably designed to ensure that the hypothetical performance was relevant to the likely financial situation and investment objectives of each advertisement’s intended audience.”

The takeaways from these cases are first, an adviser posting hypothetical performance on its public website is asking for trouble. The overall sentiment is that there is almost no way to satisfy the SEC that such performance would be relevant, and not misleading, to the broad audience potentially reached by a public website.  Second, taking action as soon as you are aware of an issue may help decrease the fines and penalties imposed by the SEC. Admittedly, the sanctions imposed in these cases totaled $200,000, which seem relatively small as compared to recent actions against firms for recordkeeping failures. In its announcement, the SEC said that four of the advisers had already begun pulling hypothetical performance off their websites and that is why their penalties were substantially less. 

Photo by Wyron A on Unsplash      

Regulatory Roundup for February and March 2025

Welcome to our February and March 2025 Regulatory Roundup, where we provide practical advice on the latest regulatory headlines. We start this issue with some clarifications about performance advertising under the SEC’s Marketing Rule and a new rule that requires Commission approval before the Division of Enforcement can use its full investigative powers. Next, we review the SEC’s changes in its attitude toward crypto assets, indicating a more measured regulatory approach. Similarly, the Division of Corporate Finance relaxes the “general solicitation” Rule 506(c) under Regulation D, allowing issuers more leeway in determining whether investors are truly accredited. Then we see the new U.S. President flexing his executive muscle by requiring a White House review of all new regulations. The Treasury Department backs off the beneficial ownership reporting requirements under the Corporate Transparency Act. We will also discuss how the SEC also took pity on institutional investment managers by granting a one-year exemption from reporting short sale data (Form SHO) – until February 17, 2026. Finally, we discuss a few of the latest SEC settlement orders. Enjoy!

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Predictions for 2025: What Private Fund Advisers Can Expect from SEC Examinations

There has been a lot of conjecture that the SEC may become friendlier to registrants because of the new administration. Given the SEC’s mandate to protect the investing public, however, we do not expect SEC examiners to become more lenient on private equity and hedge fund managers. Instead, we anticipate SEC staff becoming less focused on “rulemaking through enforcement” and (hopefully) imposing more moderate sanctions than those under Chair Gensler. SEC examiners now, more than ever, feel the pressure to show their value.

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SEC3 Gets Readers’ Choice Award for Thought Leadership in Compliance from JD Supra

SEC Compliance Consulting, Inc. (SEC3) has been recognized for its thought leadership in the compliance space by JD Supra, as part of its 2025 Readers’ Choice Awards. The Readers’ Choice Awards recognize top authors and firms read by C-suite executives, in-house counsel, media, and other professionals across the JD Supra platform during 2024. This year’s awards recognize 344 authors selected from among the more than 70,000 who published on the platform during 2024, highlighting firms for their thought leadership across 33 main topics.

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Regulatory Roundup for January 2025

Welcome to our January 2025 Regulatory Roundup, where we provide practical advice on the latest regulatory headlines. We start this issue with the appointment of the SEC’s acting Chair, Mark Uyeda. Next, we recap the SEC’s report on its aggressive enforcement efforts in the first quarter of 2025. Finally, we discuss a few of the latest SEC settlement orders, including issuers getting fined for failing to file Form D for unregistered offerings, two cases on fiduciary duty fails, and one more “off-channel” communications case that highlights what a firm did right (for once). Enjoy!

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