SEC Risk Alert Offers Initial Observations On Compliance

On 17 April 2024, the Securities and Exchange Commission (SEC) Division of Examinations issued a risk alert entitled "Initial Observations Regarding Marketing Rule Compliance" (the Alert). The Alert reflected the SEC examination staff's preliminary observations coming from its examination program and noted that compliance with Rule 206(4)-1 (the Marketing Rule) continues to be a priority for the SEC staff.

While the Alert provided some insight into how the SEC staff is viewing compliance obligations under the Marketing Rule, the utility of the Alert was somewhat muted owing to the nature of the conduct observed by SEC staff, much of which would have been problematic prior to the adoption of the Marketing Rule. For example, the staff made the following observations (among others):