The Regulatory Clock Is Running — and Examiners Are Watching
Rule 206(4)-1 — the SEC's Marketing Rule — has been mandatory for SEC-registered investment advisers since November 4, 2022. Yet the SEC's Division of Examinations keeps finding the same problems on exam after exam. After an April 2024 risk alert cataloguing more than 30 commonly observed deficiencies, the Division returned on December 16, 2025 with a second risk alert focused specifically on the Testimonials and Endorsements Provisions (Rule 206(4)-1(b)) and the Third-Party Ratings Provisions (Rule 206(4)-1(c)). The message is plain: the SEC is not going to stop looking at marketing. If your firm has not corrected these issues since 2022, the next exam is not going to go well.
The December 2025 risk alert signals another wave of targeted enforcement aimed at weeding out non-compliant marketing materials, particularly for repeat offenders. RIAs that use — or may use — testimonials, endorsements, and third-party ratings are now explicitly on notice that their next SEC examination will focus on exactly these provisions. This post walks through the most common failure patterns and gives you a practical remediation checklist.
Mistake #1: Late, Missing, or Buried Disclosures on Testimonials and Endorsements
The single most frequent finding in the December 2025 risk alert was failure to provide required disclosures at the time — or before — a testimonial or endorsement was disseminated. This showed up across websites, d/b/a pages, lead-generation firms, social media platforms, and referral networks, including 'refer-a-friend' programs that offered only nominal compensation.
The specific disclosures that were missing most often included: whether the promoter is a current client or investor in a private fund advised by the adviser; whether cash or non-cash compensation was paid; and whether the promoter has a material conflict of interest. Under Rule 206(4)-1(b)(1)(i), these disclosures must appear within or immediately adjacent to the testimonial or endorsement itself — not in a footnote three pages away, not in the website footer, and absolutely not behind a hyperlink. The Marketing Rule's adopting release makes this explicit: hyperlinked disclosures do not satisfy the 'clear and prominent' standard.
The staff also cited failures to disclose the specific amount of cash compensation. If a specific dollar amount is paid, that amount must appear in the advertisement. If compensation is calculated as a percentage of advisory fees, both the percentage and the relevant time period must be disclosed. If non-cash compensation is paid, the value must be disclosed if readily ascertainable. Vague language like 'this promoter is compensated' is not enough.
What to fix: Audit every channel where testimonials or endorsements appear — your main website, any d/b/a pages supervised persons operate, social profiles, lead-generation partner pages, and referral program landing pages. Map each piece of content against Rule 206(4)-1(b)(1)(i). If the required disclosures are not co-located with the testimonial itself, require that they be added before the next publication cycle. Consider building a disclosure template that promoters must use whenever they post on your behalf.
Mistake #2: Mislabeling Endorsements as Testimonials (and Vice Versa)
Definitions matter under the Marketing Rule. A testimonial is a statement by a current client or investor in a private fund about their experience with the adviser. An endorsement is a statement by anyone else — a former client, a referral partner, a media outlet, or an affiliated entity. The disclosure obligations are the same, but the required language differs depending on the speaker's status.
The SEC found in its September 2024 sweep settlements that one adviser labeled quotes from a former client — and from an unverified source — as testimonials. Because those persons were not current clients, the statements were endorsements, and the disclosures required for non-clients were never made. Separately, another adviser used the label 'Official Wealth Management Partner' of a university athletic program without disclosing that the university was not a client and that cash compensation had been paid for the arrangement.
What to fix: Review every quote, review excerpt, and third-party reference in your marketing materials. Verify the current-client status of every person quoted. If that status cannot be confirmed, treat the statement as an endorsement and apply the corresponding disclosure requirements. Update your promoter intake checklist to capture client/non-client status at the time the content is drafted.
Mistake #3: No Written Agreement — or an Agreement That Is Missing Required Terms
Under the Marketing Rule, an adviser must enter into a written agreement with any promoter receiving compensation above the de minimis threshold — that is, compensation totaling more than $1,000 (or the equivalent in non-cash compensation) in the preceding 12 months. The agreement must cover the scope of promotional activities, the exact terms of compensation, the disclosure process, and representations and covenants regarding the ineligible-person disqualification provisions.
The December 2025 risk alert found advisers that were either unaware that certain arrangements constituted endorsements at all, or were unable to demonstrate that their written agreements addressed all required elements. Having a written agreement on file is necessary but not sufficient — the SEC has stated clearly that a written agreement by itself does not establish a reasonable basis for believing the testimonial or endorsement complies with the rule. You still need ongoing oversight.
What to fix: Pull every promoter agreement in your files. Confirm the agreement covers: (a) scope of promotional activities; (b) specific compensation terms; (c) the required disclosures the promoter must make and when; and (d) the promoter's representation that they are not an ineligible person. If any agreement was drafted under the old Cash Solicitation Rule (Rule 206(4)-3) and has not been updated, it does not comply with the Marketing Rule and should be replaced. Document this review under Rule 204-2(a)(15)(ii).
Mistake #4: Paying Ineligible Persons Without Knowing It
Rule 206(4)-1(b)(3) prohibits compensating any promoter the adviser knows — or in the exercise of reasonable care should know — is subject to a disqualifying event within the preceding 10 years. Disqualifying events include final orders by self-regulatory organizations based on violations of laws or regulations prohibiting fraudulent, manipulative, or deceptive conduct. The December 2025 risk alert found actual exam cases where promoters with disciplinary histories from state securities regulators were receiving compensation.
This is not an obscure edge case. If your firm runs a referral program or works with a network of third-party promoters, each of those individuals or entities needs to be screened — not once at onboarding, but on an ongoing basis that accounts for new disciplinary actions. The disqualification check is your responsibility, not theirs.
What to fix: Consider building a formal diligence workflow for every new promoter, including a FINRA BrokerCheck and relevant state regulator database search. Consider periodic re-screening, at least annually, for existing promoters. Document every search result and retain it as part of your books and records.
Mistake #5: Affiliated Promoters Slipping Through the Compliance Net
The Marketing Rule provides an exemption from the written agreement and certain disclosure requirements for promoters who are affiliated with the adviser — but the exemption is conditional. The affiliation must be either readily apparent to the client or investor at the time the testimonial or endorsement is disseminated, or the adviser must disclose the affiliation at that same time.
The December 2025 risk alert found advisers using affiliated promoters — in some cases, firms with sub-advisory or other significant business relationships — without meeting either the disclosure or exemption requirements. In a recurring pattern, affiliation was disclosed when prospective clients were later introduced to the adviser, rather than at the time the testimonial or endorsement was published. That timing is too late.
What to fix: Map every affiliated relationship that touches your marketing — supervised persons' personal social media accounts, affiliated platforms, affiliated broker-dealer personnel, and any sub-advisory partners who promote your services. Confirm that the affiliation disclosure appears at the time the testimonial or endorsement is disseminated, not at some later point in the client onboarding flow.
Mistake #6: Gross Performance Without Net Performance
Despite the Marketing Rule's compliance date being more than two and a half years ago, many RIAs still struggle with performance presentation. The rule's core requirement is straightforward: when you show gross performance, you must also show net performance — with equal prominence, and for the same time periods. The April 2024 risk alert flagged widespread deficiency in this area, including advisers showing only top-performing accounts while excluding comparable accounts with lower returns, and cherry-picking time periods to present favorable results.
The staff of the Division of Investment Management updated the Marketing Rule's FAQ on March 19, 2025 to clarify when gross-only extracted performance may be shown. Staff stated they would not recommend enforcement action on advertisements showing only gross performance of an extract under four specific scenarios. However, these carve-outs are narrow and technical — they do not relieve the general requirement to show net performance alongside gross performance for standard portfolio-level presentations. Read the FAQ carefully before relying on any extracted-performance exception.
What to fix: Conduct a line-by-line review of every performance table, chart, and data card in your marketing materials. Confirm that net performance appears alongside gross performance at every level of presentation, uses the same time periods, and is displayed with equal visual prominence. If you believe a gross-only presentation qualifies for the March 2025 FAQ safe harbor, document your legal basis for that conclusion and retain it in your books and records.
Mistake #7: Third-Party Ratings Without Due Diligence or Required Disclosures
Rule 206(4)-1(c) permits use of third-party ratings — things like 'Best-Of' lists, magazine rankings, and advisor awards — but only if the adviser has a reasonable basis to believe the questionnaires or surveys used to create the rating were fair, balanced, and not designed to produce a predetermined result. The December 2025 risk alert found that some advisers failed to satisfy this due diligence requirement because they had not developed policies and procedures to form a reasonable basis, such as by actually reviewing the underlying questionnaires or surveys used for the ratings.
On the disclosure side, the same risk alert found that advisers consistently failed 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 fees paid for the use of the provider's logo or reprints. Earlier enforcement actions found one firm citing a rating from an organization that had never actually assessed it.
What to fix: Before displaying any third-party rating, obtain and review the methodology documentation from the rating provider. Confirm it meets the Rule 206(4)-1(c) standards for fair and balanced survey design. Document your review. Then check that every advertisement displaying the rating includes: the name of the rating provider, the date of the rating, the time period covered, and any compensation paid — including any fee paid for use of the provider's logo or seal.
Mistake #8: Form ADV That Does Not Match Your Actual Marketing Practices
The April 2024 risk alert found a recurring and easily avoidable problem: advisers that checked 'No' on Form ADV Part 1A to indicate their advertisements did not include third-party ratings, performance results, or hypothetical performance — when their actual marketing materials did contain exactly those things. Staff also found advisers still using outdated language referencing the former Cash Solicitation Rule (Rule 206(4)-3), inaccurately stating that no referral arrangements existed, and omitting material terms and compensation details from Form ADV Part 2A, Item 14.
Form ADV Part 1A, Item 5.L requires advisers to accurately disclose their marketing practices. Because these responses are typically updated only in the annual updating amendment, they may not reflect material changes made during the year — but exam staff can and will compare your ADV disclosures against your actual advertising materials.
What to fix: During your next annual ADV review, pull every marketing channel your firm uses and cross-reference it against your Item 5.L responses and Part 2A Item 14 disclosures. Correct any mismatches. Consider whether any mid-year changes in your marketing program — adding a new referral network, launching a social media campaign, or introducing a new performance track — warrant an interim ADV amendment.
The Bigger Picture: Policies, Procedures, and Records
Underlying almost every category of deficiency the SEC has observed is the same structural failure: policies and procedures under Rule 206(4)-7 that either were not updated to reflect the Marketing Rule, were updated on paper but not implemented in practice, or did not produce the documentation needed to demonstrate compliance during an exam. Rule 204-2(a)(15)(ii) requires advisers to maintain documentation substantiating their reasonable basis for believing that testimonials and endorsements comply with Rule 206(4)-1. If you cannot produce that documentation on exam day, you are likely to receive a deficiency regardless of what your policies say.
The recordkeeping obligation is broad. Firms are required to retain all advertisements for a minimum of five years, with the first two years readily accessible. That includes web content, social media posts, and video scripts — even content that has since been taken down. If a firm fails to produce required documentation, such as backup for performance claims or a copy of a removed social media post, that alone can result in findings.
What to fix now: Confirm that your Rule 206(4)-7 written policies address each of the following: testimonial and endorsement disclosure procedures; promoter eligibility diligence and screening; written agreement requirements; performance presentation review; and third-party rating due diligence. Then build or audit the operational workflows that implement those policies, and confirm that each step leaves a dated, retrievable record. The SEC is not asking whether you have a policy — it is asking whether you can prove you followed it.