Skip navigation
sec-seal-new.jpg SAUL LOEB/AFP/Getty Images

Marketing, Advertising Top 2021 Concern for Firms’ Compliance Officers

The results in the 2021 Investment Adviser Association survey come several months after the SEC’s new ad rule.

Advertising and marketing were top of mind for investment advisors’ compliance executives this year in the wake of the Securities and Exchange Commission’s new advertising rule, according to a new survey from the Investment Adviser Association and the ACA Group.

The 2021 Investment Management Compliance Testing Survey received responses from compliance professionals at 350 different investment advisor firms. In all, 58% deemed advertising/marketing to be among the year’s top three “hottest” compliance topics, which was a boost of 33 percentage points from 2020. Fifty-three percent of compliance professionals labeled cybersecurity among the hottest topics, while climate change/ESG grew to 45% of respondents, an increase from 14% in the previous year.

The SEC’s ad rule was finalized and published in the Federal Register in March of this year, with an effective date of May 4 (firms have until Nov. 4 of next year to reach full compliance with the rule, according to the IAA). The final changes were originally announced in December of last year, with former Chair Jay Clayton saying the updates were intended to modernize “traditional advertising and solicitation regimes” that hadn’t been changed in decades.

The revised rules will allow advisors to use testimonials and endorsements in their advertisements, provided they disclose if the endorser is a client or has been compensated for appearing. Advisors will be able to solicit positive testimonials from sites with customer reviews (like Yelp) and feature them in marketing plans, and will also not be required to get client acknowledgements that they’ve received disclosures about testimonials. 

While business and continuity plans (BCPs) related to the pandemic and compliance around digital assets were considered hot topics by 17% of respondents, firms weren’t worried about the COVID-19 virus causing compliance lapses. According to the survey, not a single respondent reported “material compliance violations” stemming from the pandemic’s effects. The results showed that 62% of responding firms had employees working remotely, while 37% had some employees teleworking, while 35% of firms had closed their offices temporarily. 

According to the survey, most respondents said they did not need to make “material changes” to their BCP because of the pandemic. For those that did, the majority reported that the changes allowed “all” or “key” personnel to work from home, and improved the “ability to inform and communicate with employees.”

The survey also asked compliance officers to rank their priorities for regulators that could impact advisory firms. At the top was “unified, federal data privacy and cybersecurity laws,” with firms responding that federal regulators should create a “national data breach notification regime” to make it easier for companies to comply with requirements. Concerns about regulation on sustainable investing, the custody rule, and e-delivery followed cybersecurity. Concerns about Form CRS, which the SEC implemented along with Regulation Best Interest last year, rounded out the top five.

“The SEC should reassess Form CRS (e.g., by conducting investor testing) to determine whether the form is meeting the stated goals of educating investors about the differences between investment advisers and broker-dealers and is in fact helping investors make informed decisions,” the survey read.

Among the respondents, 28% manage below $1 billion in assets, 39% handle $1 billion to $10 billion, and 33% exceed $10 billion (half of the firms had between 11 and 50 employees, according to the survey results). The respondents worked with a range of different clients, including retail with $1 million or less, private funds, institutional clients and high-net-worth individuals. 2021 marks the 16th year the survey was conducted, according to the IAA.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.