Risk Alert: The Marketing Rule

The SEC’s Division of Examinations published a risk alert on the Marketing Rule in December 2025, which focused exclusively on the use of testimonials, endorsements, and third-party ratings. 

Testimonials and Endorsements

Unsurprisingly, the staff observed advisers using testimonials and endorsements that were not compliant.  Failing to provide required disclosures at the time the testimonial or endorsement was disseminated was cited as the most common reason for non-compliance.  The SEC called out specifically the use of social media influencers, referral programs, and lead-generation firms.  Firms utilizing any such mechanisms should review these arrangements to ensure that proper disclosures are being shown at the time the endorsement and/or testimonial is being disseminated.  Investment advisers should be cognizant of the fact that hiring a third party to promote the firm does not absolve the firm of its responsibilities under the Marketing Rule.  Prior to engaging a third party for this purpose, the firm should ensure that the third party is aware of the firm’s regulatory obligations and willing to cooperate on such matters. 

The Marketing Rule requires disclosures that are clear and prominent.  The staff cited the following observed instances of non-compliance with this particular requirement: (i) hyperlinking disclosures rather than including them within the testimonial or endorsement, (ii) using a smaller sized font for the disclosures, and (iii) using a lighter color font for the disclosures. 

Another observation of non-compliance was the incorporation of testimonials from current clients and/or endorsements from former clients from third-party websites onto the adviser’s website without properly labeling them as such.  Any adviser using reviews from Google or other third-party review systems should ensure that such reviews are properly labelled in accordance with requirements.

The staff also observed advisers failing to disclose material terms of compensation arrangements.  In particular, the staff observed instances of generic disclosures that omitted material information about the compensation paid to social media influencers.  Again, it’s important that advisers only hire professionals who understand advisers’ regulatory obligations and agree to cooperate with said obligations.  Additionally, the staff noticed instances where advisers did not enter into written agreements with paid promoters, despite paying them above the $1,000 de minimis threshold over a 12-month period. 

The staff also emphasized the importance of providing required disclosures at the correct time.  When using paid promoters, required disclosures need to be made when the testimonial or endorsement was disseminated, not when prospective clients or investors are introduced to advisers.

Third-Party Ratings

When showing third-party ratings in marketing material, advisers are required to have a reasonable basis for believing that questionnaires or surveys used in the preparation of the third-party ratings were structured to make it equally easy for a participant to provide favorable and unfavorable responses and were not designed to produce any predetermined results.  However, the staff observed instances where advisers did not conduct a sufficient level of due diligence to actually form a reasonable basis for this belief.  It is imperative that advisers obtain or review a copy of the questionnaires or surveys used in the preparation of ratings.

The staff also called out rather rudimentary instances of non-compliance, such as displaying insufficiently descriptive logos in place of clearly identifying the third party providing the ratings and failing to note the date third-party ratings were received.

The staff also declared that disclosures that are to be presented in a clear and prominent manner should not be displayed (i) in hyperlinks, (ii) at the bottom of the website away from the actual ratings, or (iii) in smaller font.

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Please note that information provided above is for general educational purposes only and should not be construed as legal advice.