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Once a fund manager is registered, Rule 206(4)-1
imposes additional restrictions on advertising that the SEC has determined
would be fraudulent deceptive or manipulative. That means public presentations
could be considered an advertisement.
First I want to look back at the definition of an
"advertisement" for purposes of the rule. An
advertisement for purposes of the rule 206(4)-1 is:
"[A]ny notice, circular, letter or other written
communication addressed to more than one person, or any notice or other
announcement in any publication or by radio or television, which offers (1) any
analysis, report, or publication concerning securities, or which is to be used
in making any determination as to when to buy or sell any security, or which
security to buy or sell, or (2) any graph, chart, formula, or other device to
be used in making any determination as to when to buy or sell any security, or
which security to buy or sell, or (3) any other investment advisory service
with regard to securities."
In meeting with potential investors, invariably, someone
will pull out a Powerpoint presentation to discuss the fund manager, their past
performance, and future business plan. In looking at the definition of
advertisement, a purely oral presentation would not be an advertisement. One
the projector lights up, the presentation starts moving into the realm of an
The final straw is leaving a copy of the presentation
behind. Now the presentation is clearly a "written communication."
And don't forget about the requirements of Regulation D
regarding advertising and disclosure requirements for privately-offered
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
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