When the SEC replaced the decades-old advertising and cash solicitation rules with a single, consolidated Marketing Rule — Rule 206(4)-1 under the Investment Advisers Act — the compliance community had over eighteen months to prepare. The rule became effective in November 2022, and the compliance date of November 4, 2022 has long since passed. Yet in examinations, enforcement actions, and risk alerts, the SEC continues to find widespread noncompliance among registered investment advisers of every size.

The Marketing Rule was designed to modernize a regulatory framework that had not meaningfully changed since 1961. The old rules drew rigid distinctions between advertisements (one-to-many communications) and solicitations (one-to-one referral arrangements). That binary framework made little sense in an era of social media, podcasts, and influencer marketing. The new rule collapses both concepts into a single definition of "advertisement" and replaces prescriptive prohibitions with a principles-based approach built around seven general prohibitions.

The flexibility of that principles-based framework is precisely what is tripping advisers up. Below, we walk through the most common compliance failures we continue to see — and what advisers should be doing about them.

Testimonials and Endorsements Without Proper Disclosures

Under the old rules, testimonials were flatly prohibited in adviser advertising. The Marketing Rule now permits them — but with conditions. A "testimonial" is a statement by a current client about their experience with the adviser. An "endorsement" is a statement by someone who is not a current client — including influencers, solicitors, and other promoters.

Both testimonials and endorsements trigger disclosure obligations. The adviser must clearly and prominently disclose: (1) that the person giving the testimonial or endorsement is a client (or non-client, as applicable); (2) whether the person was compensated for the statement, and if so, a description of the compensation; and (3) a summary of any material conflicts of interest.

What we see in practice is advisers collecting client reviews, posting them on websites and social media, and either omitting these disclosures entirely or burying them in boilerplate that no reasonable investor would read. The SEC has been clear that disclosures must be "clear and prominent" — not hidden behind hyperlinks, footnotes, or click-throughs.

Advisers using promoters — the new term for what the old rule called solicitors — face additional requirements. Written agreements are required for compensated promoters. The adviser must have a reasonable basis for believing the promoter is complying with the agreement. And the promoter's compensation arrangement must be disclosed at the time of the solicitation, not days later in a follow-up email.

Performance Advertising Pitfalls

The Marketing Rule permits performance advertising for the first time in a meaningful way, but the conditions are exacting. Advisers may present gross and net performance, but net performance must always accompany gross performance with equal prominence. This means the same font size, the same time period, and the same presentation format. An adviser cannot display gross returns in a large, bold header while burying net returns in a footnote below.

Hypothetical performance — including model portfolio backtests — is subject to its own set of requirements. The adviser must adopt and implement policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience. In practice, this means hypothetical performance cannot be used in mass-distributed materials. It should be limited to one-on-one presentations or narrowly targeted communications where the adviser can make a meaningful determination about the audience's sophistication and needs.

Extracted performance — showing the results of a subset of investments from a portfolio — is permissible only if the advertisement also presents the total portfolio's performance with equal prominence. Advisers cannot cherry-pick their best-performing positions and present them in isolation.

Related performance — aggregating the performance of a group of related portfolios — must include all related portfolios and cannot selectively exclude underperformers. The criteria for defining the related group must be applied consistently.

Third-Party Ratings

The use of third-party ratings, such as those from financial publications or ranking services, is permitted under the Marketing Rule but subject to specific conditions. The adviser must have a reasonable basis for believing that any questionnaire or survey used in the rating process is structured to produce a fair result. The advertisement must clearly disclose the date of the rating, the period evaluated, the identity of the party that created and tabulated the rating, and whether the adviser provided compensation in connection with obtaining the rating.

We frequently see advisers displaying third-party accolades — "Top Adviser" badges, publication rankings, or industry awards — without any of the required disclosures. Simply linking to the rating provider's methodology page is not sufficient. The disclosures must appear in the advertisement itself.

Social Media Remains a Minefield

Social media posts by an adviser or its personnel that meet the definition of an "advertisement" are subject to the full weight of the Marketing Rule. The definition is broad: any direct or indirect communication an investment adviser makes that offers investment advisory services and is directed to more than one person (or directed to one person if it is compensated). A LinkedIn post discussing the adviser's investment philosophy and linking to the firm's website is an advertisement. A tweet promoting recent portfolio performance is an advertisement.

Character limits on platforms like X (formerly Twitter) do not excuse an adviser from making required disclosures. If the required disclosures cannot fit within the medium's constraints, the adviser should not use that medium for that particular communication. The SEC has not created a social media carve-out, and advisers should not assume one exists.

Employee social media activity is another area of concern. Advisers must have policies and procedures reasonably designed to prevent their supervised persons from posting content that constitutes an advertisement without appropriate review and approval. The days of treating personal social media accounts as beyond the firm's compliance perimeter are over.

Books and Records Failures

Amended Rule 204-2 requires advisers to maintain records of all advertisements they disseminate, along with documentation of their review and approval process. For performance advertising, advisers must retain the data and calculations supporting every performance claim. For testimonials and endorsements, records of the disclosures provided must be preserved.

Many advisers have updated their policies and procedures on paper but have not built the operational infrastructure to actually capture and archive these records. Social media posts are particularly problematic — posts may be edited or deleted without any record being preserved. Advisers should implement archiving tools that automatically capture all social media activity in real time.

What the SEC Is Looking for in Examinations

The SEC Division of Examinations has made the Marketing Rule a priority. In risk alerts and examination findings, the staff has focused on several key areas: whether the adviser has adopted and implemented written policies and procedures that address the specific requirements of the new rule (not just updated the old advertising policy with minor edits); whether performance advertising complies with the presentation and disclosure requirements; whether testimonials and endorsements carry the required disclosures; and whether the adviser's books and records reflect actual compliance, not just paper compliance.

Examiners are also scrutinizing the substantive accuracy of marketing claims. The Marketing Rule's general prohibitions bar advertisements that contain untrue statements of material fact, are misleading, or omit material information. An adviser's claim to follow a particular investment strategy must be accurate and verifiable. A claim that the adviser "never" charges certain fees must be literally true.

Practical Steps for Compliance

Advisers who have not yet fully implemented Marketing Rule compliance — or who completed an initial implementation but have not revisited it — should take several concrete steps:

  • Audit all existing marketing materials against the new rule's requirements, including the firm's website, pitch decks, social media profiles, and any third-party rating displays.
  • Review and update written policies and procedures to address each substantive requirement of the rule — not merely to reference the rule's existence.
  • Implement a pre-approval workflow for all advertisements, including social media posts by supervised persons.
  • Build a compliant performance advertising framework that pairs gross and net performance, maintains supporting data, and restricts hypothetical performance to appropriate audiences.
  • Deploy social media archiving tools that capture posts in real time and preserve records for the required retention period.
  • Train all personnel — not just the compliance team — on what constitutes an advertisement and what is expected of them.
  • Engage outside counsel to conduct a targeted compliance review before your next examination cycle.

The Marketing Rule represents the most significant change to adviser advertising regulation in sixty years. The SEC has given advisers ample time to comply. Advisers who treat this as a one-time implementation project rather than an ongoing compliance obligation do so at their own risk.