But while the SEC’s rulemaking might be a “step in the right direction,” Simon warned advisors that there might be issues with their social media presence.

That’s because the language of the Investment Advisers Act of 1940 considers any testimonial to be “misleading per se”—so clients who praise their advisor on social media platforms may cause the advisor to run afoul of the rule. Simon hopes that by modernizing the Ad Rule, advisors will be able to avoid issues with client testimonials online.

The proposed changes also clarify how advisors are permitted to present performance results, risks and benefits.

But the rule will also dramatically expand the definition of advertising, warned Simon.

“The proposal would impose additional requirements that we are not happy about, including expanding the definition of advertising to include investors in pooled investment vehicles and possibly even one-on-one communications with clients,” he said. “This would be especially problematic because it would require advisors to designate an employee to review and approve all advertisements prior to use. How burdensome would that be if it captures almost every communication you have with clients? This is a big deal.”

Proxy Voting
The SEC has also issued a “troubling proposal” regarding proxy voting, said Simon, affecting advisors who use proxy advisory firms to help them with voting.

“It’s a rule that would codify that proxy advisor firms are solicitors and require additional regulatory involvement in recommendations that they make to clients,” said Simon. “We view that as bad policy and a step backwards. We fear it impinges on an advisor’s ability to vote client shares in [the client’s] best interest, as they must given their fiduciary duty.”

Accredited Investors
The SEC recently amended its definition of accredited investors to include employees of private funds who want to invest in those funds, SEC and state registered advisors, and family offices with at least $5 million in AUM and their family clients—but the definition should be expanded further, said Simon.

“The SEC did not include our recommendations that all of your clients be considered accredited investors,” he said. “We believe that if a client, a taxpayer or an investor has an investment advisor managing their assets on a discretionary basis, that’s why they’re using a fiduciary, and they should be considered sophisticated. The SEC has not moved there.”

Other Areas Of IAA Advocacy
There are also signs that the SEC intends to revisit and further modernize its custody rule in light of the rise of digital assets and other advisor custody issues, said Simon, a process that the IAA intends to monitor closely.