SEC Exam Staff’s Latest Risk Alert Regarding Compliance with the Advisers Act Marketing Rule

On December 16, 2025, the Division of Examinations of the US Securities and Exchange Commission (the “SEC,” and such division, the “Examinations Division”) published its first and only Risk Alert of the year (“Risk Alert”), providing information on compliance by registered investment advisers (“RIAs” or “advisers”) with the requirements of Rule 206(4)-1 under the US Investment Advisers Act of 1940 (the “Marketing Rule”).¹ This is the third risk alert published by the Examinations Division with respect to the Marketing Rule, having previously issued Marketing Rule risk alerts on June 8, 2023 and April 17, 2024.² This latest Risk Alert focuses on the testimonials and endorsements (Rule 206(4)-1(b)) and third-party ratings (Rule 206(4)-1(c)) requirements under the Marketing Rule.

Under the Marketing Rule, which was significantly amended in 2020, RIAs may engage promoters³ for testimonials⁴ and/or endorsements⁵ and include third-party ratings in their advertisements so long as they meet certain disclosure and oversight requirements. The latest Risk Alert discusses the Examinations Division’s observations regarding RIAs’ compliance with those requirements and other compliance practices under the testimonials and endorsements provisions, as well due diligence and disclosure requirements under the third-party ratings provisions. The Risk Alert does not address all observed deficiencies related to the Marketing Rule.⁶

Overall, the observations could be described as “low hanging fruit.” Rather than the Examinations Division making novel regulatory findings or providing further guidance or interpretation regarding how to apply the Marketing Rule in specific circumstances or perceived gray areas of the rule, the Risk Alert instead appeared to focus on instances where the Examinations Division believed RIAs were simply not following the “plain text” requirements of the Marketing Rule. The observations provide a helpful reminder that the SEC continues to focus on advisers’ compliance with the Marketing Rule. Below, we summarize the points discussed in the Risk Alert.

Testimonials and Endorsements

The Marketing Rule prohibits the use of testimonials and endorsements unless the adviser satisfies certain disclosure and oversight conditions. The primary observation in this area was that the required disclosures were not provided at the time the testimonial or endorsement was disseminated. Examples of non-compliance in this regard included omitted disclosures on advisers’ websites where testimonials and endorsements were presented (including websites using alternative business names of their supervised persons (“d/b/a” sites)). Examinations Division staff also observed advisers using lead-generation firms, social media influencers, referral networks, and “refer-a-friend” programs without meeting the applicable requirements (the staff noted that in some instances the adviser did not recognize that certain of these arrangements created an endorsement or testimonial in the first place). Additional observations included:

Lack of Clear and Prominent Disclosures: The staff’s observations in this area included:

• Disclosures that did not make clear whether the promoter was a current/former client or investor,⁷ was paid in cash or non-cash compensation, or had a material conflict of interest;
• Disclosures that were in the form of a hyperlink rather than placed within the testimonial or endorsement itself;⁸ and
• Disclosures that were in smaller or lighter text font than the testimonial and endorsement.⁹

Finally, the staff observed advisers compensating their advisory clients with gift cards to write reviews on third-party websites apparently without having a reasonable basis to believe that the person providing the testimonial complied with the disclosure requirements.

Lack of Required Compensation Disclosures: In addition to observing simple failures to disclose compensation arrangements as required, notably the staff observed advisers providing generic disclosures about compensation arrangements that omitted certain material information. For example, the staff observed advisers that disclosed that promoters (including social media influencers) received compensation from advisers for client referrals but omitted material information about the actual compensation terms of the referral payments. Here, the staff cited to the Adopting Release, stating that “[i]f a specific amount of cash compensation is paid, the advertisement should disclose that amount. If the compensation takes the form of a percentage of the total advisory fee over a period of time, then the advertisement should disclose such percentage and time period. With respect to non-cash compensation, if the value of the non-cash compensation is readily ascertainable, the disclosures should include that amount.”

Lack of Required Conflicts Disclosures: In addition to observing simple failures to disclose material conflicts of interest, the staff specifically referred to arrangements with advisory clients who were also investors in the adviser, or who were principals or officers of other advisory firms that had subadvisory or other significant arrangements with the adviser.

Oversight and Compliance Failures: The staff’s observations in this area included:

• Advisers that were unaware that certain statements constituted testimonials or endorsements;
• Advisers that were unable to demonstrate that they satisfied the requirement that the adviser has a reasonable basis for or believing that the testimonial or endorsement complies with the applicable Marketing Rule requirements;
• Advisers that did not enter into or maintain written required agreements with paid promoters that described the scope of the agreed-upon activities and the terms of the compensation for those promotion activities; and
• Advisers’ written agreements with promoters that did not fully describe the scope of the promotion activities agreed upon or the terms of their compensation. In some cases, advisers claimed the arrangements met the requirements of the de minimis compensation exemption because each time the adviser compensated the promoter, it was for less than $1,000. But the staff noted in these instances that total compensation in fact exceeded $1,000 during the preceding 12 months, and thus did not meet the definition of de minimis compensation under the Marketing Rule.

Ineligible Persons and Affiliate Disclosures: In this regard, the staff observed:

• Advisers that compensated promoters who they knew or should have reasonably known were ineligible due to their disciplinary history with state securities regulators. When the Marketing Rule was amended in 2020, the scope of disqualifying events were slightly expanded from those under the prior (and now rescinded) cash solicitation rule.
• Advisers that used promoters where the affiliation between the advisers and the promoters was not readily apparent or disclosed at the time of dissemination of the testimonial or endorsement; but instead, the affiliations were disclosed later when the prospective clients or investors were introduced to the advisers.

Third-Party Ratings

The Examinations Division staff’s observations regarding third-party ratings included:

Due Diligence Requirement: The staff helpfully shared the following examples of how certain advisers are fulfilling the “due diligence” requirement for third-party ratings (i.e., the requirement 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): (1) reviewing publicly disclosed information about third-party questionnaire or survey methodologies; (2) obtaining any questionnaires or surveys used in the preparation of the rating; and/or (3) seeking representations from the third-party rating agencies regarding general aspects of how the questionnaires or surveys were designed, structured, and administered.

However, the staff stated that it also observed advisers that did not appear to have sufficient information to form a reasonable basis for believing that questionnaires or surveys used to prepare the ratings were structured as required under the Marketing Rule. In these instances, the advisers generally had neither developed policies and procedures for satisfying the due diligence requirement nor had the advisers otherwise taken steps to meet this requirement, such as by obtaining or reviewing a copy of the questionnaires or surveys that were used in preparation of the ratings.

Lack of Clear and Prominent Disclosures: The staff’s observations in this area included:

• Website Links: Advisers that included links to third-party websites which provided the ratings, but neither the advertisements nor third-party websites contained the required disclosures. In addition, it was not clear how the advisers could have had a reasonable basis for believing that the third-party ratings included the required clear and prominent disclosures.
• Time Period Disclosures: Advisers that included third-party ratings in their advertisements that did not clearly and prominently identify the dates on which the ratings were given and the periods of time on which the ratings were based. In some cases, the third-party ratings were listed with reference to a range of years in which the adviser was the recipient of the third-party rating, but the dates included by the adviser listed a year in which the adviser did not receive the award.
• Ratings Logos: Advisers included third-party rating logos in their advertisements that did not clearly and prominently identify the third party that created and tabulated the ratings (i.e., the logo did not clearly identify the third parties, and the advisers did not otherwise clearly and prominently include such disclosures).
• Placement of Compensation Disclosures: Advisers that did not disclose such payments where the advisers posted the ratings in their advertisements, including when reprinting or including a link on the advisers’ websites to the third-party rating providers’ advertisements, and placing the disclosures at the bottom of the website pages away from the actual ratings.
• Compensation Disclosures Generally: Advisers did not disclose payments that were made for: (1) the use of the third-party rating providers’ logos or reprints of the ratings; (2) the advisers’ priority placement in the third-party providers’ advertisements or for upgraded or enhanced exposure; and (3) referrals to the advisers, such as providing links to award recipients on the third-party rating providers’ websites that displayed the award recipients (i.e., third-party rating providers received payments for referrals through the linked webpage).

Conclusion

The Examinations Division staff’s observations in the Risk Alert seemingly reflect straightforward failures to comply with the Marketing Rule as written, rather than provide interpretations of the Marketing Rule’s requirements. This black-letter approach could be a reflection of the current SEC’s approach to regulation. Nevertheless, this Risk Alert provides a helpful reminder to RIAs regarding the Marketing Rule’s requirements and the related statements in the Adopting Release to which the Examinations Division cited. The Risk Alert also demonstrates that the SEC staff continues to focus on ensuring that advisers implement and carry through with policies and procedures reasonably designed to ensure compliance with the Advisers Act.

Separately, we note this Risk Alert’s repeated references to website and social media usage. Applying compliance requirements and internal controls to fast-paced or immediately public-facing forms of broadcast or publishing—such as websites and social media platforms—has been challenging for investment advisers for decades, and the Risk Alert highlights some of the continuing challenges under the Marketing Rule for these types of communications. Advisers that actively use these types of communications might find the staff’s observations to be a helpful checklist against current practices.

¹ The Examinations Division publishes risk alerts to provide compliance insights and transparency to regulated entities, such as investment advisers and broker-dealers.

² The June 8, 2023 risk alert discussed general prohibitions in connection to adviser advertisements, testimonials and endorsements, third-party ratings, and Form ADV requirements. The April 17, 2024 risk alert discussed various compliance issues with the compliance rule, books and records rule, Form ADV requirements and general prohibitions in connection to adviser advertisements.

³ Promoters are any persons who provide testimonials or endorsements, whether compensated or uncompensated, pursuant to the Marketing Rule (see Marketing Rule Adopting Release).

⁴ Testimonials include any statement by a current client or private fund investor about the client’s or private fund investor’s experience with the investment adviser or its supervised persons (see Marketing Rule Adopting Release).

⁵ Endorsements include any statement by a person other than a current client or private fund investor that indicates approval, support, or recommendation of the investment adviser or its supervised persons or describes that person’s experience with the investment adviser or its supervised persons (see Marketing Rule Adopting Release).

⁶ In the Risk Alert, the staff specifically stated that they were not including observations regarding instances where the promoter who provides endorsements or testimonials is also acting as an investment adviser within the meaning of Section 202 (a)(11) of the Advisers Act or a broker or dealer within the meaning of Section 3(a)(4) or 3(a)(5) of the Securities Exchange Act of 1934. These “status” issues under the Marketing Rule have yet to be formally addressed by the staff.

⁷ This observation included circumstances where the advisers incorporated content from third-party promoters’ websites.

⁸ The clear and prominent standard requires that the disclosures be included within the testimonial or endorsement, and that it would not be consistent with the clear and prominent standard to use a hyperlink to include the disclosures required under the rule (see Marketing Rule Adopting Release).

⁹ In order to be clear and prominent, the disclosures must be at least as prominent as the testimonial or endorsement (see Marketing Rule Adopting Release).