Financial · guide
The SEC Marketing Rule for Small RIAs: Testimonials, Performance Advertising and Common Deficiencies
Updated
The rule in one paragraph
Rule 206(4)-1 under the Investment Advisers Act, usually called the Marketing Rule, governs how SEC-registered investment advisers advertise. It replaced the old advertising rule and the cash solicitation rule (former Rule 206(4)-3). The rule became effective May 4, 2021, with a compliance date of November 4, 2022 (Investment Adviser Marketing, 86 FR 13024). At time of writing (September 2026) the SEC's exam staff have published four rounds of observations on what advisers get wrong.
What counts as an advertisement
An advertisement is any direct or indirect communication an adviser makes to more than one person (or to one person if it contains hypothetical performance) that offers advisory services to prospective clients or investors, or new services to existing ones. Extemporaneous live oral communications and information in regulatory filings are excluded. A second prong sweeps in any compensated testimonial or endorsement (17 CFR 275.206(4)-1(e)(1)). Website copy, social media posts, pitch decks and client-referral programs are all in scope.
The seven general prohibitions
Paragraph (a) lists seven things an advertisement may not do:
| # | Prohibition |
|---|---|
| 1 | Include an untrue statement of material fact, or omit a fact needed to make it not misleading |
| 2 | Include a material statement of fact the adviser cannot substantiate on demand |
| 3 | Include information reasonably likely to cause an untrue or misleading implication about the adviser |
| 4 | Discuss potential benefits without fair and balanced treatment of material risks or limitations |
| 5 | Reference specific investment advice in a way that is not fair and balanced |
| 6 | Include or exclude performance results, or present time periods, in a way that is not fair and balanced |
| 7 | Otherwise be materially misleading |
These apply to every advertisement, even one that satisfies all of the specific conditions below.
Testimonials and endorsements
A testimonial comes from a current client or investor; an endorsement comes from anyone else. Both are allowed if the adviser meets three conditions in paragraph (b). First, disclosure: the ad must state clearly and prominently, at the time it is disseminated, whether the speaker is a client, whether cash or non-cash compensation was provided, and a brief statement of any material conflicts of interest. Second, oversight: the adviser must have a reasonable basis to believe the testimonial complies with the rule and must have a written agreement with any promoter, other than certain affiliated persons whose affiliation is readily apparent. Third, disqualification: the adviser may not compensate an ineligible person, such as someone subject to specified disciplinary events. The written-agreement and disqualification conditions do not apply where the promoter receives no compensation or de minimis compensation, defined as $1,000 or less (or the equivalent value in non-cash compensation) during the preceding 12 months (17 CFR 275.206(4)-1(b)). The disclosure condition still applies to every testimonial and endorsement.
Performance advertising
Paragraph (d) sets the performance rules:
- Gross performance may not be shown unless net performance is presented with at least equal prominence, over the same time period, and using the same type of return and methodology.
- For any portfolio other than a private fund, performance must be shown for one-, five- and ten-year periods, each with equal prominence and ending no later than the most recent calendar year-end, with a shorter period allowed if the portfolio has not existed that long.
- No statement or implication that the SEC has approved or reviewed the performance.
- Related performance, extracted performance and predecessor performance each carry their own conditions.
- Hypothetical performance, defined as results not actually achieved by any portfolio, including model and back-tested results, may be used only if the adviser adopts policies to ensure it is relevant to the intended audience's financial situation and objectives, and provides enough information for the audience to understand both the criteria and assumptions and the risks and limitations (17 CFR 275.206(4)-1(d)).
For a small RIA: no gross-only returns, no cherry-picked periods, no model results on a public website.
What examiners keep finding
The Division of Examinations has issued Marketing Rule risk alerts in September 2022, June 2023, April 2024 and December 2025. The April 17, 2024 alert, "Initial Observations Regarding Advisers Act Marketing Rule Compliance," cited policies that were generic or did not address the adviser's actual channels such as websites and social media; social media posts describing benefits without risks; cherry-picked investments and manipulated time periods; disclosures in unreadable fonts; net returns calculated with lower fees than those charged to the intended audience; hypothetical performance with no audience-relevance analysis; missing records supporting performance claims and third-party rating questionnaires; and Form ADV answers that misdescribed what the ads contained (SEC Risk Alert, April 2024; McDermott summary). The December 2025 alert, "Additional Observations Regarding Advisers' Compliance with the Advisers Act Marketing Rule," focused on testimonials, endorsements and third-party ratings: disclosures missing at the time of dissemination, generic compensation language without material terms, no written agreements or oversight for paid promoters, payments to ineligible persons, and rating disclosures buried in hyperlinks or small fonts (Paul Hastings summary).
Recordkeeping and Form ADV
Rule 204-2(a)(11) requires a copy of every advertisement the adviser disseminates, with alternatives for oral ads (keep the written or recorded materials used) and for compensated testimonials (keep a record of the disclosures provided), plus any questionnaire or survey used in preparing a third-party rating. Rule 204-2(a)(16) requires the accounts, working papers and other records needed to demonstrate the calculation of any performance shown. Records must be kept for at least five years from the end of the fiscal year of the last entry, the first two years in an appropriate office of the adviser (17 CFR 275.204-2). Form ADV Part 1A Item 5.L, added with the rule, asks whether the adviser's advertisements include performance results, specific investment advice, testimonials, endorsements, third-party ratings, hypothetical performance or predecessor performance, and whether compensation was paid; the answers must match what the marketing actually contains (Investment Adviser Marketing, 86 FR 13024).
RegPing's financial-regulation bot delivers SEC risk alerts and rule releases into Discord.
Where to verify
- 17 CFR 275.206(4)-1, the Marketing Rule
- 17 CFR 275.204-2, the books and records rule
- Investment Adviser Marketing adopting release, 86 FR 13024
- SEC Division of Examinations risk alerts
- SEC Risk Alert, April 17, 2024
- SEC small entity compliance guide on the Marketing Rule
This guide is general information, not legal advice. Verify against the primary source and consult counsel before acting.
Questions people ask
Can a small RIA pay clients for testimonials under the Marketing Rule?
Yes, with conditions. Every testimonial needs clear and prominent disclosure of client status, compensation and material conflicts. If compensation exceeds $1,000 (or equivalent non-cash value) in the preceding 12 months, the adviser also needs a written agreement and must confirm the promoter is not an ineligible person.
Does the Marketing Rule require showing net performance?
Yes. Gross performance may only be shown alongside net performance presented with at least equal prominence, over the same period and using the same methodology. Non-private-fund portfolios must also show one-, five- and ten-year returns ending no later than the most recent calendar year-end.
When did the Marketing Rule take effect?
The rule became effective May 4, 2021, and all SEC-registered advisers had to comply by November 4, 2022, when the prior advertising and cash solicitation rules were superseded.