SEC promises revised advertising rule soon

Investment Management director Dalia Blass says current rule disconnected from way world works.

The Securities and Exchange Commission is on the verge of proposing reforms to rules governing advertising, a regulation that tends to vex investment advisers.

Despite the 35-day government shutdown earlier this year, the agency is still on track to release amendments to the advertising regulation in the “very near future,” Dalia Blass, director of the SEC Division of Investment Management, said Friday at an Investment Adviser Association conference in Washington.

The advertising rules have not been rewritten since they were established in the 1960s, although the SEC has provided guidance in the interim.

Regulation is not keeping pace with developments in online communication, such as the advent of testimonials about businesses and customer service, according to Ms. Blass.

“You can’t have a rule that is disconnected from how the current world works,” Ms. Blass told the IAA audience.

Investment advisers have struggled to stay within the advertising rules.

“That really is one that keeps compliance people up all night, probably every night,” said Gail Bernstein, IAA general counsel, who interviewed Ms. Blass on stage.

The SEC has issued no-action letters and risk alerts about advertising. Now the time has come for a more comprehensive update, Ms. Blass said.

“It truly is a patchwork quilt type of regulation,” she said.

Advisers who are dually registered as brokers operate on their brokerage side under a Financial Industry Regulatory Authority Inc. advertising rule that has been more recently updated. In 2017, Finra also released guidance for brokers’ use of social media.