Third Marketing Rule Risk Alert and New Settlements Portend Vigorous Enforcement

The SEC Division of Examinations recently issued a third risk alert (Risk Alert) concerning advisers’ compliance with new Rule 206(4)‑1 (Marketing Rule or Rule) under the Investment Advisers Act of 1940 (Advisers Act). The Risk Alert focuses on not only observed deficiencies in compliance with the Rule but also associated deficiencies in compliance with Advisers Act Rule 206(4)‑7, Rule 204‑2 and Form ADV. Days before issuing the Risk Alert, the SEC also resolved five enforcement proceedings involving Marketing Rule violations. This article discusses the Risk Alert and those settlements, with commentary from Michael W. McGrath, partner at Dechert. “Neither the Risk Alert nor the settlements break new ground in terms of interpreting an adviser’s obligations under the Marketing Rule, but they are helpful to understand where the SEC staff is devoting its time and attention,” McGrath told the Hedge Fund Law Report. See “Second Marketing Rule Risk Alert Provides Little Substantive Guidance” (Aug. 3, 2023); and “Marketing Rule Risk Alert Forecasts Coming Exams” (Oct. 20, 2022).

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