What is the SEC Marketing Rule?

The SEC Marketing Rule (Rule 206(4)-1), effective November 2022, modernized the regulatory framework governing how investment advisers can advertise and use testimonials, endorsements, and third-party ratings. It replaced the decades-old advertising and cash solicitation rules with a unified, principles-based approach.

Key Changes from Prior Rules

Now Permitted (with conditions):

• Client testimonials
• Third-party endorsements
• Performance advertising
• Social media marketing
• Influencer partnerships

Core Prohibitions:

• Untrue or misleading statements
• Unsubstantiated material claims
• Cherry-picking performance
• Misleading implications

Testimonials and Endorsements

Requirements:

• Written agreement with promoter
• Disclosure of compensation
• Disclosure of conflicts of interest
• Oversight and compliance review

Disclosure Must Include:

• That it is a testimonial/endorsement
• Compensation received (if any)
• Material conflicts of interest
• Whether the person is a client

Performance Advertising

Requirements:

• Net of fees performance
• Time period disclosure
• Benchmark comparison (if appropriate)
• Material assumptions and limitations

Prohibited Practices:

• Gross performance without net
• Cherry-picked time periods
• Excluding underperforming accounts
• Misleading comparisons

Third-Party Ratings

Permitted If:

• Not compensated for the rating
• Rating methodology is disclosed
• Date and scope are clear
• Not misleading in context

Compliance Checklist

1. Update advertising policies and procedures
2. Review existing marketing materials
3. Implement testimonial documentation
4. Establish performance advertising standards
5. Train staff on new requirements
6. Document all reviews and approvals