SEC Division of Examinations Shares Further Observations on Marketing Rule Compliance

On December 16, 2025, the US Securities and Exchange Commission’s (SEC) Division of Examinations released a risk alert, “Additional Observations Regarding Advisers’ Compliance with the Advisers Act Marketing Rule.”

The new alert offers further detail for investment advisers, investors, and other market participants regarding compliance with amended Rule 206(4)-1 under the Investment Advisers Act of 1940 (the Marketing Rule), with particular attention to the Marketing Rule’s testimonials and endorsements and third‑party ratings provisions. This follows the Division’s April 17, 2024, risk alert, “Initial Observations Regarding Advisers Act Marketing Rule Compliance.”

Testimonials and Endorsements

The Marketing Rule prohibits the use of testimonials and endorsements in advertisements unless the adviser satisfies certain disclosure and oversight conditions. The rule also prohibits advisers from compensating certain ineligible persons for providing testimonials or endorsements.

The staff observed widespread non-compliance in advisers’ use of both compensated and uncompensated testimonials and endorsements. The most frequent issue was the failure to provide required disclosures at the time of dissemination across various platforms, including websites (including “d/b/a” pages), lead-generation firms, social media, and referral networks or “refer-a-friend” programs that offered de minimis compensation. The staff also noted that while many advisers updated their policies and procedures, some failed to do so or failed to implement the updated policies, resulting in non-compliant advertisements.

The staff’s observations regarding advisers’ use of testimonials and endorsements include the following.

Clear and prominent disclosures: The staff noted omitted or unclear disclosures regarding the promoter’s status as a client or investor, compensation, and material conflicts of interest. Examples of disclosures that were made, but were not considered to be clear and prominent, included relying on hyperlinks, using small or light fonts for disclosures, and failures related to third-party website reviews.

Disclosure of material terms of compensation arrangements: The staff observed advisers that failed to disclose material terms of compensation arrangements, for example, by providing generic disclosures about compensation arrangements that omitted certain material terms.

Disclosure of material conflicts: The staff observed advisers that failed to disclose material conflicts resulting from the advisers’ relationships with promoters or the compensation arrangements for the adviser’s testimonials or advertisements, for example, by failing to disclose promoters’ financial interests in the promoted advisers.

Oversight and compliance: The staff observed advisers that failed to meet the “reasonable basis for belief” and written agreement requirements for paid promoters, often due to a lack of policies and procedures or misapplication of the de minimis exemption. For example, advisers entered into agreements that failed to describe the scope of the promoter’s activities and the terms of compensation, or where the individual payments were under $1,000 but aggregate compensation exceeded $1,000 over the prior 12 months.

Ineligible persons: Advisers compensated promoters they knew — or, in the exercise of reasonable care, should have known — were ineligible, for example because of disciplinary histories with state securities regulators.

Oversight and compliance: Advisers used affiliated promoters without meeting applicable disclosure, agreement, or exemption requirements, for example by disclosing the relationship at the time prospective clients or investors were introduced to the adviser rather than at the time the testimonials or endorsements were disseminated.

Third-Party Ratings

Under the Marketing Rule’s third-party rating provisions, third‑party ratings may not be used unless the adviser has a reasonable basis to believe the questionnaires or surveys used to prepare them meet specified criteria and required disclosures are provided.

The staff’s observations regarding specific third-party rating provisions include the following.

Due diligence: This provision requires advisers to have a reasonable basis to believe that questionnaires or surveys used to create third-party ratings were fair and balanced and not designed to produce a predetermined result. The staff observed that some advisers failed to satisfy this due diligence requirement, often because they had not developed policies and procedures to form a reasonable basis, such as by reviewing the questionnaires or surveys used for the ratings.

Clear and prominent disclosures: The staff saw advisers use third‑party ratings without providing or having a reasonable basis to believe the rating included all required clear or prominent disclosures. Deficiencies included failures to clearly identify the rating date and covered time period, the identity of the third-party rating provider, and any compensation provided for the rating, including for the use of the providers’ logos or reprints, and for the adviser’s enhanced exposure or priority placement in the third-party providers’ advertisements. Some advisers also failed to make disclosures clear and prominent, instead using hyperlinks, small fonts, or burying them at the bottom of a webpage.

Considering these observations, the Division encourages advisers to evaluate their practices and update their compliance programs. Firms should promptly review all advertisements to remediate disclosure gaps, enhance promoter oversight, and properly document third‑party rating due diligence and compensation. Advisers should prioritize contemporaneous implementation and recordkeeping under Advisers Act Rule 204-2 governing advisers’ books and records to substantiate their compliance efforts.

If you have questions about the Marketing Rule and how it may affect your investment advisory business, contact Jon K. Jurva, Vanessa Meeks, or another member of the ArentFox Schiff Corporate & Securities group.

Read our previous alerts on the SEC Marketing Rule and risk alerts: