Marketing Rule adopting release

The Commission's explanation of the Marketing Rule, and the place the definition of “advertisement” is actually worked out. The definition has two prongs. The first catches any direct or indirect communication an adviser makes that offers advisory services to prospective clients or private fund investors, or new advisory services to current ones, and reaches communications to more than one person. The second catches any testimonial or endorsement for which the adviser gives compensation directly or indirectly, whether oral or written and whether to one person or many. Both prongs exclude information reasonably designed to satisfy a statutory or regulatory notice, filing or other required communication, such as Form ADV Part 2 or Form CRS. Only the first prong excludes extemporaneous, live, oral communications. The first prong also excludes one-to-one communications, except where they contain hypothetical performance that was not given in response to an unsolicited request or to a private fund investor.

• 01Read this before deciding what is and is not an advertisement. Most of the hard calls a firm faces are answered here rather than in the rule text.
• 02The one-to-one carve-out has a hole in it exactly the size of hypothetical performance, which is the thing most often sent one to one.
• 03Compensation in the second prong includes non-cash compensation, so the prong reaches arrangements a firm may not think of as paid.
• 04An adopting release answers the comment letters, which is where the edge cases got resolved. That is why it is worth more than a summary.

• A piece treated as outside the rule because it went to one person, when it carried hypothetical performance.
• Testimonials from someone compensated in a way the firm did not count as compensation.