The Securities Compliance Podcast Season 5 Episode 14 – SEC Marketing Rule FAQs

Podcast

Securities Compliance Podcast: Compliance in Context

In Season 5 Episode 14 of The Securities Compliance Podcast: Compliance in Context, host and Calfee Partner Patrick D. Hayes takes an in-depth look at one of the most talked about compliance items from the first half of the year, the two new recently published FAQs to the SEC Marketing Rule. Issa Hanna from Eversheds Sutherland and Ted McKutcheon from Securities Law Counsel help guide the conversation. In the Headlines section, Patrick reviews a recent denial from the SEC of an attempt by 16 firms to revise settlements they made with the commission regarding their supervision of employees’ off-channel communications. The episode closes with another installment of What’s On My Mind, where a quote from Anthony Bourdain helps provide a little bit of satisfaction and peace of mind at this time of year.

Show

Headlines

• SEC denied an attempt by 16 firms to revise settlements they made with the commission regarding their supervision of employees’ off-channel communications

Interview with Issa Hanna and Ted McKutcheon

• Background regarding SEC Marketing Rule FAQs.
• Practical challenges related to performance marketing and demonstrating gross versus net.
• What problems did firms face with implementation?
• What solutions do the new Marketing Rule FAQs provide?
• Recap of the new Marketing Rule FAQs.
• What specific guidance can firms take away from the footnotes to the Marketing Rule FAQs?
• What is the broader impact of the new FAQs related to performance marketing?
• What strategic decisions will firms need to make before utilizing the benefits of the new FAQs?

What’s on My Mind

• Reviewing a quote from Anthony Bourdain and the satisfaction of completing another regulatory filing season.

Quotes

13:21 – “Folks will recall that the Marketing Rule was officially adopted at the very tail end of the Clayton-era SEC…There were lots of issues that were debated from an interpretive perspective under the rule that fit there. And you had this new category of performance that the SEC seemed to have just made up out of thin air, called (so-called) extracted performance. And folks were struggling to figure out how existing practices in the industry, particularly the private fund industry, would fit into that category of performance.” – Issa Hanna 

40:53 – “Remember that, sure, we're getting some relief with respect to the net of fees requirement here, and certain circumstances. It doesn't necessarily get you out of the Marketing Rule altogether. That's a really important thing to remember is that if the extracted performance that you're dealing with is still an offer of your advisory services or an offer of a private fund that you're advising, you know, that's still an advertisement subject to other applicable requirements of the rule, including the general prohibitions of the rule. So you do have to keep that in mind.” – Issa Hanna 

44:45 – “The part of the approach that's deemed okay with respect to the principle of making fair and balanced presentations is this layered disclosure or layered approach to disclosure, which is consistent with something like putting a note referring the consumer of the advertisement, and in this case, the net gross presentation of the gross presentation to disclosure and net presentation located in another part of the document.” – Ted McCutcheon 

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About the Securities Compliance Podcast: Compliance in Context

Introducing the Securities Compliance Podcast: Compliance in Context presented by Calfee, Halter & Griswold, and the National Society of Compliance Professionals and hosted by Patrick D. Hayes, Partner and Chair of Calfee's Investment Management practice.

Designed as a personal master class for the securities legal and compliance professional, this podcast embodies Patrick’s passion to help you put Compliance In Context™ by combining the technical expertise of industry thought leaders and innovators with the practical experience of doers and key decision makers.

Listeners will find the podcast on Apple Podcast, Google Podcast, Spotify, and Stitcher.

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The opinions expressed by guest speakers and panelists during Securities Compliance Podcasts may not necessarily reflect the viewpoints of the attorneys and professionals of Calfee, Halter & Griswold LLP, or its subsidiaries or affiliates. Calfee’s educational content is intended to inform and educate readers about legal developments and is not intended as legal advice for any specific individual or specific situation. Please consult with your attorney regarding any legal questions you may have. With regard to all content including case studies or descriptions, past outcomes do not predict future results.