On June 8, 2023, the Division of Examinations (referred to as “the Division”) of the U.S. Securities and Exchange Commission (or “SEC”) issued its second Risk Alert (known as the “2023 Risk Alert”) on the amended Rule 206(4)-1 (or the “Marketing Rule”) under the Investment Advisers Act of 1940.
The amended Marketing Rule, introduced by the SEC, became mandatory on November 4, 2022, and impacts investment advisers registered or required to be registered with the SEC (also called “RIAs”).
The Risk Alert is an essential tool used by the SEC to provide guidelines regarding compliance matters and identify common issues faced by RIAs in complying with the newly amended Marketing Rule. It acts as an aid for RIA’s to develop and implement effective compliance policies and procedures.
The 2023 Risk Alert addresses several topics that are significant to any investment adviser and can serve as a reference for those needing to ensure their firm is in compliance with the new Marketing Rule. For this reason, legal professionals and firms should pay particular attention to both the issuance and the content of these Risk Alerts.
It’s crucial to keep abreast of the SEC’s Risk Alerts and the changes they signal in the regulatory environment. This requires a thorough understanding of the regulations and guidelines presented and necessitates an ongoing effort to maintain and update compliance programs based on these changes.
It is this author’s recommendation that legal professionals frequently review and scrutinize the Risk Alerts issued by the SEC, as non-compliance can lead to costly penalties, reputational damage, and potential legal repercussions.