The SEC has introduced new proposed guidelines for investment management advertising and marketing. The agency cited three primary drivers: technology, an evolved business environment, and greater investor sophistication.
Many proposed enhancements focus on traditional advertising channels rather than database management. However, the SEC's concern extends to investment data that is fraudulent, deceptive, or manipulative and misleading.
What is "Advertising" Now?
The SEC is adopting a principles-based approach rather than specific prohibitions. Crucially, the agency is broadening the definition of "advertisement" significantly.
The proposed rule defines advertisement as: any communication, disseminated by any means, by or on behalf of an investment adviser, that offers or promotes investment advisory services or seeks to obtain or retain clients. This replaces the previous requirement for "written" communications or radio/television notices.
Communications encompass emails, text messages, videos, podcasts, blogs, billboards, social media, and print materials. Excluded are unsolicited inquiries, live oral communications, regulatory responses, and communications subject to other regulations.
Investment Data IS Advertising
The SEC indicated that communications investment advisers use to offer or promote services have equal potential to mislead regardless of whether disseminated directly or through intermediaries.
The agency cited an enforcement action against an adviser whose false advertisements included submitting performance information in questionnaires submitted to online databases made available to subscribers.
Therefore, investment data constitutes advertising.
CCOs Must Manage Investment Data Distribution
Investment data can no longer remain solely within operations or marketing departments independent of compliance oversight.
Since potential clients use investment database data for due diligence, published information attracts prospects. All data must present an accurate, current, and competitive picture of investment management firms.
Performance represents just one dataset among many. Qualitative data—narratives and firm stories—differentiate firms when performance and characteristics are similar across competitors.
CCOs Must Adapt to Understand Investor Data Consumption
Compliance professionals must view business operations from stakeholder perspectives. If potential investors use database information for investment decisions, compliance teams must assess risks that this information is inaccurate or misleading.
Compliance professionals must update marketing review procedures accordingly. Chief Compliance Officers must approve data distribution and ensure accuracy and timeliness across databases.
The solution involves implementing centralized technology—a data vault—where investment information is deposited, reconciled, and distributed consistently to industry databases.
In Summary
The relationship-driven sales approach has evolved. Modern sales cycles span 5-7 meetings over 12-18 months. Due diligence begins with data.
Data now drives relationships rather than personal connections alone. Consequently, compliance teams must become significantly more active in the data distribution process.