On December 16, 2025, the SEC’s Division of Examinations issued its latest risk alert regarding Rule 206(4)-1 under the Investment Advisers Act of 1940, known as the Marketing Rule. Following the examination staff’s September 2022, June 2023 and April 2024 risk alerts regarding the staff’s areas of emphasis in, and observations from, examinations of investment advisers’ compliance with the Marketing Rule, this risk alert addresses the staff’s observations regarding investment adviser compliance with the “Testimonials and Endorsements Provisions” (Rule 206(4)-1(b)) and the “Third-Party Ratings Provisions” (Rule 206(4)-1(c)) of the Marketing Rule.
Testimonials and Endorsements Provisions. The Marketing Rule prohibits the use of compensated testimonials and endorsements (i.e., promoters) in advertising unless the adviser satisfies certain disclosure and oversight requirements. The most common issue the examinations staff observed with the use of endorsements and testimonials was that the required disclosures were not provided at the time the testimonial or endorsement was initially disseminated. Other staff observations discussed in the risk alert include advertisements that contained testimonials or endorsements that did not provide one or more of the required clear and prominent disclosures, or that provided the disclosures but not in a clear and prominent manner, and compensation provided to promoters who were not eligible to receive compensation under the Marketing Rule.
Third-Party Rating Provisions. The Marketing Rule prohibits the use of third-party ratings in advertisements unless the adviser has a reasonable belief that the questionnaire or survey used in the preparation of the third-party rating is structured to allow for favorable and unfavorable responses and is not designed to produce a predetermined result, and the advertisement must contain certain clear and prominent disclosures required under the Marketing Rule. The examinations staff observed that some advisers had not developed policies and procedures or taken other steps to maintain compliance with the “reasonable belief” requirement with respect to the use of third-party ratings. Other staff observations discussed in the risk alert include advertisements that included third-party ratings without providing some or all of the required clear and prominent disclosures.
In sharing its observations, the SEC staff encouraged investment advisers “to reflect upon their own practices, policies and procedures and to implement any appropriate modifications to their training, supervisory, oversight, and compliance programs.” With the risk alert, the SEC staff signals its continued focus on advertising practices of investment advisers.
The risk alert is available here.
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