The SEC Marketing Rule: Testimonials, Endorsements, and the Traps RIAs Are Still Falling Into

Disclaimer: This article is for informational purposes only and does not constitute legal or regulatory advice. --- The SEC's amended Marketing Rule (Rule 206(4)-1) has been in effect for a few years now. Most RIAs know it exists. Most have updated their compliance manuals to say something about it. And yet, when examiners walk in the door, they keep finding the same problems. In December 2025, the SEC's Division of Examinations issued a Risk Alert spelling out, in considerable detail, exactly where firms are coming up short. The focus was on two areas: 1) testimonials and endorsements, and 2) third-party ratings. If your firm uses any of these in your marketing, this alert should be required reading. If you haven't reviewed your practices recently, now is a good time to do that before an examiner does it for you. Here is what the SEC found and, more importantly, what it means in practice. --- Disclosures: The Most Common Failure One of the most common deficiencies the SEC found was straightforward: firms were either skipping required disclosures entirely, or burying them somewhere no reasonable person would see them. When a client testimonial or endorsement appears in your marketing, things need to be disclosed clearly: whether the person giving the testimonial is a current client, whether they were compensated, and whether any material conflicts of interest exist. Those disclosures need to appear at the time the testimonial is encountered. Not on a separate disclosures page, not behind a hyperlink, and not in a font size that requires a magnifying glass. The SEC was direct about this. Placing disclosures in a hyperlink, in smaller print, or in a location separated from the testimonial itself does not meet the "clear and prominent" standard. The disclosure needs to be as prominent as the testimonial it accompanies. If the testimonial is front and center on your homepage, the disclosure needs to be right there with it. This sounds simple. And it is, once you know to look for it. The problem is that a lot of firms set up their website a couple of years ago, added a testimonials section, dropped in the required language somewhere on a disclosures page, and called it done. That approach does not work. --- Referral Programs, Influencers, and "Refer-a-Friend": You Probably Have an Endorsement Issue You Don't Know About One of the more striking findings in the Risk Alert was how many firms failed to recognize that certain marketing arrangements constituted endorsements in the first place. If you have a referral arrangement where existing clients receive compensation, account credits, or any form of reward for sending new clients your way, that is an endorsement. The Marketing Rule applies. If you work with a social media influencer who promotes your firm, that is an endorsement. If a lead-generation platform receives compensation in exchange for sending prospects your way, that arrangement likely falls under the testimonials and endorsements framework. In many cases, advisers treated these arrangements as informal marketing rather than regulated endorsements subject to disclosure, oversight, and documentation requirements. That is precisely the kind of gap that creates exam findings. The practical question to ask is not "did we intend this to be an endorsement?" It is "does this arrangement involve someone promoting our firm, and are they receiving anything of value in return?" If the answer to both is yes, you need to treat it as an endorsement and apply the full requirements of the rule. --- Written Agreements: Required, Not Optional If you compensate anyone more than $1,000 over a twelve-month period for testimonials or endorsements, you are required to have a written agreement with that person. The agreement needs to cover the disclosure process, the scope of their promotional activities, and the specific compensation terms. It also needs to address the "ineligible person" disqualification provisions, meaning you need to confirm the person is not barred from serving as a promoter due to a disqualifying disciplinary event. Many advisers either lack these agreements entirely or incorrectly rely on the de minimis exemption, mistakenly believing they are exempt when their total payments, including non-cash compensation, exceed the threshold. Non-cash compensation counts. That is worth repeating. If you are giving referral sources gifts, account fee waivers, or any other form of non-cash benefit, that value counts toward the $1,000 threshold. If you are unsure whether your arrangements clear the threshold, assume they do and put the agreements in place. --- Third-Party Ratings: Diligence Is Not Optional Either Using a "Top Advisor" award or a five-star rating from a third-party publication in your marketing? The Marketing Rule requires you to have a reasonable basis for believing the methodology behind that rating is sound. That means the rating was structured to allow both favorable and unfavorable responses and was not designed to produce a predetermined outcome. While some advisers demonstrated diligence by reviewing methodologies or obtaining representations from rating providers, others lacked evidence that any evaluation had occurred at all. If you cannot document that you reviewed the rating methodology before using it in marketing, you have a gap. Required disclosures around third-party ratings, including the date of the rating, the name of the rating provider, and any compensation paid to obtain the rating, also need to be present and visible. --- What to Do Right Now If you have not reviewed your marketing practices against the requirements of the Marketing Rule recently, here is a practical starting point: - Pull every page of your website that contains a client testimonial, a rating, an award, or an endorsement. For each one, confirm that the required disclosures are visible, prominent, and placed at the point where the testimonial appears. Confirm that the language is accurate and current. - Audit your referral arrangements and any third-party promotional relationships. Document which ones involve compensation, confirm you have written agreements in place, and verify that none of your promoters are ineligible persons. - Review your third-party ratings and awards. Confirm you have documentation in your files showing that you reviewed the rating methodology before using it in marketing. - Look at your compliance policies and ask whether your actual practices match them. If they do not, update the practices or update the policies. Then test them. If your firm is growing, acquiring, or in the middle of a transition, this review is especially important. The December 2025 Risk Alert warns that repeat findings after publication of these expectations can be referred to Enforcement. The SEC has now made its expectations clear multiple times. Gaps identified in a future examination will be harder to characterize as innocent oversight. --- Final Thought The Marketing Rule gave RIAs meaningful new tools to compete for clients. Testimonials, client reviews, and third-party recognition are powerful. Used properly and with the right disclosures in place, they are legitimate and effective. The firms that take the time to get this right are not just reducing exam risk. They are building marketing programs that can actually hold up over time. If you are unsure whether your current practices are in good shape, or if you would like a second set of eyes on your marketing materials before your next examination cycle, we are happy to help.