Respond, Don’t React: What the SEC’s Latest Marketing Rule FAQs Actually Mean

A Narrow SEC Update, Not a Market-Moving Shift

Last Friday, the SEC released one of its periodic FAQ updates clarifying certain aspects of the SEC Marketing Rule. This update provided guidance on two nuanced, if not obscure, areas:

• the use of model fees with differing performance, and
• the use of compensated testimonials and endorsements from individuals subject to certain final orders under Section 203(e)(9) of the Advisers Act.

As outlined below, these updates are relevant only to limited, fact-specific scenarios and are not particularly significant when compared to last March’s updates.

Reacting vs. Responding to Regulatory Guidance

In the asset management space, the instinct should never be to react to new regulatory guidance but to respond. This is a lesson learned through on-the-ground experience: many regulatory updates appear meaningful at first glance, but in practice add little clarity and can even create confusion if applied too broadly.

Why Context and Judgment Still Matter

This lesson becomes even more important with the introduction of AI. As AI evolves at a rapid pace, the “human in the loop”, someone who understands the true application of the law, not just its wording, becomes critical. The law is not applied in a vacuum, and understanding how it operates in real-world asset management contexts requires experience and judgment.

At Zeidler Group, we pride ourselves on understanding our clients’ actual businesses, the day-to-day realities, the nuances of the industry, and how regulatory changes may truly impact them.

The “Human in the Loop” in an AI-Driven Compliance World

Last week’s update is a perfect example of why regulatory developments must be analyzed carefully and assessed for their practical implications. While AI can ingest these updates easily, it must also be trained on their nuanced and often limited application, something that requires deep industry expertise and practical experience.

Avoiding Over-Training and False Positives in Compliance AI

As AI in legal and compliance functions continues to evolve, we increasingly see examples of systems that are over-trained and generate excessive false positives, often in the name of using AI for its own sake.

By combining our practical experience with the power of AI, our team ensures that regulatory updates are embedded into our suite of Legal tech tools’ knowledge base in a way that enhances accuracy without introducing unnecessary friction or inflated compliance flags.

Keeping Marketing Material Review Tool Current—Without Creating Unnecessary Friction

Zeidler Group’s Marketing Material Review Tool (MMR-Tool) is an AI-powered compliance solution designed to review and assess asset management marketing materials against applicable regulatory requirements, including the SEC Marketing Rule.

As with all global marketing-related updates, Zeidler Group will retrain and fine-tune the MMR-Tool to ensure its legal knowledge remains current, while also ensuring the tool understands these updates as a seasoned asset management lawyer would, not merely as a machine processing new text.

What the SEC Actually Clarified

The SEC’s updated FAQs can be found here.

The update addresses two specific areas:

• • Model Fees

Advisers may use “actual net performance” in an advertisement even if the fees charged to the intended audience (“anticipated fees”) are expected to be higher than those reflected in the performance shown, provided appropriate disclosures are included. The SEC clarified that advisers may use various methods to illustrate the impact of differences between actual fees and anticipated fees on performance.

• • Endorsements and Testimonials

Advisers may use compensated endorsements or testimonials from individuals subject to a FINRA or other SRO final order under Section 203(e)(9) of the Advisers Act, provided the order did not result in a bar, suspension, or prohibition from acting in any capacity under the federal securities laws, and the individual is in compliance with the order. As always, appropriate disclosures are required.

In Summary: Disclosure Remains the Deciding Factor

As ever, it all comes down to disclosures.

If your compliance tools are generating more noise than insight, it may be time to rethink how regulatory guidance is being operationalized. We help asset managers apply regulatory nuance the way experienced lawyers do in practice, not as a box-checking exercise.

If you have questions about how the SEC Marketing Rule applies to your specific marketing practices, or how AI is being used within your compliance framework, our team is happy to discuss the practical implications.

Get in touch to see how the MMR-Tool helps teams apply regulatory updates to marketing materials with practical, risk-calibrated insight.