NASAA Model Marketing Rule Overview
The North American Securities Administrators Association (NASAA) has been developing a model marketing rule for state-registered investment advisers that would create a more uniform framework across state jurisdictions. This initiative responds to the SEC's adoption of the new Marketing Rule (Rule 206(4)-1) in 2020, which replaced the decades-old advertising rule for federally registered advisers. Because the SEC rule does not directly apply to state-registered advisers, NASAA recognized the need for a comparable standard that would modernize marketing requirements at the state level while reflecting the realities of smaller advisory firms.
Key Differences from the SEC Marketing Rule
The NASAA model rule proposal shares several foundational principles with the SEC Marketing Rule, including a principles-based approach to advertising, the prohibition of materially misleading statements, and the requirement that all marketing materials be fair and balanced. However, the proposal also diverges from the SEC rule in key areas. Most notably, the NASAA proposal contemplates more prescriptive guardrails around testimonials and endorsements, recognizing that state-registered advisers may lack the compliance infrastructure to implement the SEC's more flexible standards without additional guidance.
Social Media and Digital Marketing
One of the most significant aspects of the NASAA proposal is its treatment of social media and digital marketing. State-registered advisers, many of whom are solo practitioners or small firms, have increasingly turned to social media platforms for client acquisition and engagement. The model rule attempts to address the unique compliance challenges of social media marketing, including the ephemeral nature of certain content formats, the blurring of personal and professional communications, and the difficulty of pre-reviewing content posted in real time.
Performance Advertising Requirements
Performance advertising receives detailed attention in the NASAA proposal. Like the SEC rule, the model rule would permit the use of gross and net performance data, subject to specific presentation requirements. However, the NASAA proposal includes additional provisions aimed at preventing cherry-picking of performance results and ensuring that hypothetical and back-tested performance data is presented with appropriate context and risk disclosures. State-registered advisers who have historically avoided performance advertising may find new opportunities under the model rule, but only if they invest in the compliance infrastructure to support proper documentation.
State Adoption Timeline and Fragmentation
The timeline for adoption of the NASAA model rule will depend on individual state action, as NASAA itself does not have rulemaking authority. Instead, the model rule serves as a template that states can adopt, modify, or decline. This means that the marketing compliance landscape for state-registered advisers will likely remain fragmented during the adoption period, with some states implementing versions of the model rule earlier than others. Advisers operating in multiple states will need to track each jurisdiction's progress toward adoption.
Preparation for the New Marketing Framework
Preparation for the new marketing framework should begin well before formal adoption in any given state. Advisers should audit their existing marketing materials against the model rule's requirements, develop internal review and approval procedures for new content, and establish record-keeping systems that capture all marketing materials along with the date of first use, approval records, and any supporting documentation for performance claims. Building these systems now will smooth the transition when the rule takes effect.
Compliance Approved Support
The cost and complexity of compliance with a new marketing rule framework can be daunting for smaller firms. Compliance Approved addresses this challenge by providing automated marketing material review, AI-powered analysis against both current state rules and the proposed NASAA model rule, and customizable approval workflows designed for firms of all sizes. Our platform ensures that state-registered advisers can confidently market their services without running afoul of evolving regulatory standards.