Third-Party Rankings: A Compliance Reminder for Firms
Vigilant Insights
Introduction
A recent report involving a senior Forbes editor and an undisclosed $6 million payment from the Founder of Shook Research has raised questions about the transparency and credibility of Third-Party Advisor Rankings.
While Forbes and Shook Research have stated there is no evidence the payment affected the rankings, the situation highlights important compliance considerations for Firms that use Third-Party Rankings and Ratings in their Marketing Materials, particularly regarding due diligence, transparency, and the SEC Marketing Rule.
Vigilant Director, Laura Arnott, was quoted in Wealth Management regarding an article they wrote on this topic, and her insights can be found below.
Laura Arnott Insights
Laura stated that the SEC Marketing Rule permits Firms to use Third-Party Ratings and Rankings in Advertising Materials when they have a reasonable basis for believing the rating was prepared in a fair and balanced manner.
She noted that new SEC rulemaking is unlikely as a result of the situation. However, she indicated that the controversy could lead to increased regulatory scrutiny regarding how Firms use Third-Party Rankings in their Marketing Materials, with regulators likely focusing more on the Firms using the rankings than on the ranking organization itself.
The article also references an SEC Risk Alert noting deficiencies among some registrants related to Third-Party Ratings, including failures to update compliance policies and procedures and perform appropriate due diligence regarding Rating Providers.
Vigilant’s Conclusion
The situation serves as an important reminder that Firms should carefully evaluate Third-Party Rankings and Awards before incorporating them into Marketing Materials. While there is no evidence presented that the Forbes/Shook rankings were directly influenced by the reported payment, Firms should maintain appropriate due diligence and oversight when relying on Third-Party Ratings or Rankings.
Vigilant can help Firms in navigating these requirements through our Advertising and Marketing Review Services, providing timely review of Marketing Materials, disclosure development, advertising library assessments, and analysis of Marketing Compliance Policies, Procedures, and Processes.
Vigilant can also help Firms establish customized review workflows and train marketing teams on applicable advertising and marketing requirements.
By incorporating appropriate compliance oversight into the Marketing Review process, Firms can more confidently use Rankings, Awards, and other Third-Party content while helping ensure their Marketing Materials remain consistent with regulatory expectations.
To learn more about Vigilant’s Marketing Review Services, click the link below to schedule a call with us.