SEC Division of Examinations Issues Risk Alert on Investment Adviser Marketing Rule Compliance

On December 16, 2025, the SEC’s Division of Examinations (the “Staff”) issued a risk alert (“Risk Alert”) highlighting observations from examinations of investment advisers’¹ compliance with Rule 206(4)-1 (the “Marketing Rule”) under the Investment Advisers Act of 1940 (the “Advisers Act”). In particular, the Risk Alert addresses observations regarding advisers’ satisfaction of disclosure requirements and oversight and compliance practices under the Testimonials and Endorsements Provisions², as well as advisers’ due diligence and disclosure requirements under the Third-Party Ratings Provisions³. This is the first risk alert issued by the Staff in over a year⁴.

Observations Related to Testimonials and Endorsements

The Marketing Rule prohibits the use of testimonials and endorsements in advertisements unless an adviser satisfies specific disclosure, oversight and compliance conditions. It also prohibits compensation to certain ineligible persons for providing testimonials or endorsements. The Staff observed advisers using testimonials and endorsements that did not appear to comply with all or some of the requirements for both compensated and uncompensated testimonials and endorsements. The most common observed compliance issue regarding endorsements and testimonials was advisers’ failure to provide the requisite disclosures at the time the testimonial or endorsement was disseminated.

• Missing or inadequate disclosures at the time of the endorsement or testimonial: Many testimonials and endorsements lacked required disclosures at the time they were disseminated. These included whether the promoter (e.g., a placement agent) was a current client or investor, whether cash or non-cash compensation was paid, and whether material conflicts of interest existed.
• Clear and prominent disclosures: In some cases, disclosures were present but not “clear and prominent,” such as being hidden in hyperlinks or displayed in smaller, lighter font than the testimonial text. Advisers incorporated client testimonials or endorsements from third-party websites onto their own sites without clearly disclosing that the statements were from current or former clients.
• Disclosure of material terms of compensation arrangements: Advisers often omitted material details about compensation arrangements, such as the nature and amount of payments to promoters. Overly generic disclosures were common, particularly in arrangements with social media influencers and referral networks. Some advisers provided gift cards to clients for reviews but failed to ensure compliance with disclosure requirements for paid testimonials.
• Disclosure of the material conflicts: Advisers did not adequately disclose conflicts arising from relationships with promoters or compensation arrangements. Examples include promoters with financial interests in the adviser or affiliated advisory firms.
• Oversight and compliance: Advisers frequently lacked a reasonable basis for believing testimonials or endorsements complied with the Marketing Rule. Observations included inadequate compliance policies, missing or insufficient written agreements with paid promoters, and inadequate substantiating documentation. Some advisers misapplied the de minimis exemption, treating individual payments under $1,000 as exempt when aggregate compensation exceeded $1,000 in a 12-month period.
• Ineligible persons: Advisers compensated ineligible persons for endorsements when the advisers knew, or in the exercise of reasonable care should have known, that the promoters were ineligible persons when the endorsements were disseminated. For example, certain advisers made payments to promoters who were disqualified due to disciplinary histories, despite the Marketing Rule’s prohibition on compensating ineligible persons.
• Promoter affiliated with the adviser: Advisers used affiliated promoters without meeting disclosure and agreement requirements or qualifying for the exemption for associated persons. Certain affiliations were often not disclosed until later in the client onboarding process.

Observations Related to Third-Party Ratings

The Marketing Rule prohibits the use of a third-party rating in an advertisement unless an adviser meets specific conditions, including having a reasonable basis for believing that any questionnaire or survey used in the preparation of the third-party rating meets certain criteria and providing clear and prominent disclosures.

• Due diligence: Advisers often lacked a reasonable basis for believing that questionnaires or surveys used to prepare third-party ratings were structured to make it equally easy for a participant to provide both favorable and unfavorable responses and were not designed to produce predetermined results. While some advisers reviewed publicly available information about third-party questionnaires or survey methodologies, obtained questionnaires or surveys, or sought representations from rating providers, others failed to take any steps, such as obtaining or reviewing questionnaires, or implementing policies and procedures addressing this requirement.
• Clear and prominent disclosures: Many advertisements featuring third-party ratings did not include required clear and prominent disclosures. In some cases, advisers used hyperlinks for disclosures or placed them in small font or at the bottom of webpages, failing to meet the “clear and prominent” standard. Additionally, advisers included links to third-party websites that contained the ratings of the examined advisers but neither the website (nor the adviser’s website) included the required disclosures.

• • Common omissions included:

• • • The date of the rating and the time period upon which it was based.
    • Identification of the third party that created and tabulated the rating.
    • Disclosure of compensation arrangements related to obtaining or using the rating.

• Disclosure of material terms of compensation: Advisers frequently failed to disclose payments made to rating providers for:

• • Use of logos or reprints of ratings.
  • Priority placement or enhanced exposure in advertisements.
  • Referral arrangements linked to award listings on third-party websites.
  • Fees paid to be considered for ratings.

These omissions occurred even when advisers posted ratings on their own websites or linked to third-party advertisements.

• Presentation of ratings: Some advisers listed ratings with incorrect date ranges or referenced years in which they did not receive the award. Others displayed rating logos without clearly identifying the rating provider.

S&K Observations

As this was the only risk alert issued by the Staff in 2025, the Risk Alert emphasizes that future examinations will continue to focus on advisers’ compliance with the Marketing Rule, including an adviser’s policies and procedures designed to ensure compliance, testing of advertisements across websites, social media and investor presentations, assessment of books and records retention for advertisements and supporting documentation and controls around testimonials, endorsements and third-party ratings.

We recommend that advisers implement robust review processes for advertisements, including testimonials, endorsements and third-party ratings, and maintain documentation supporting compliance, particularly for such testimonials, endorsements and third-party ratings. Written agreements with promoters should be executed prior to endorsements, and all required disclosures must be included in testimonials and endorsements. Personnel should be trained on the Marketing Rule requirements, especially regarding the use of testimonials, endorsements and third-party ratings. Firms should establish monitoring and testing protocols to identify and remediate deficiencies promptly to maintain readiness for SEC examinations.

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¹ The Marketing Rule only applies to investment advisers registered or required to be registered under section 203 of the Advisers Act.

² See Advisers Act Rule 206(4)-1(b) (the “Testimonials and Endorsements Provisions”).

³ See Advisers Act Rule 206(4)-1(c) (the “Third-Party Ratings Provisions”).

⁴ This is the fourth risk alert the Staff has issued on Marketing Rule compliance observations. See Risk Alert: Examinations Focused on the New Investment Adviser Marketing Rule (June 8, 2023); Risk Alert: Examinations Focused on New Investment Adviser Marketing Rule (Sept. 19, 2022) and Risk Alert: Initial Observations Regarding Advisers Act Marketing Rule Compliance (April 17, 2024).