Investment advisers registered with the Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940 (the Advisers Act) must adhere to specific substantive requirements. One notable requirement is Rule 206(4)-1 under the Advisers Act (the Rule), a key regulator of marketing and solicitation activities. A pivotal change was made on December 22, 2020, when the SEC adopted amendments to Rule 206(4)-1 (the Amendments). These alterations notably expanded the definition of “advertisement” to encompass transmitted communications.
The advent of these amendments merits a closer inspection of their impact on private fund advisers, particularly in the context of presenting track records. Historically, the regulatory environment for private fund advisers has been an intricate space due to the complexity of measuring and communicating the performance of investments. Thus, the amendments usher in not just a further elaboration on what constitutes an “advertisement”, but also a fresh set of challenges directly affecting the sphere of private fund advisors.
Given the experiential shift induced by the Amendments, it’s imperative that professionals within the law and investment domain strive for a thorough understanding of these changes. However, the amendments’ complexity necessitates a more detailed analysis. For a comprehensive overview of the topic exploring the implications for private fund advisers in detail, refer to the extended commentary and evaluation by Morrison & Foerster LLP, accessible here.