SEC Staff Publishes New Marketing Rule FAQs

On January 15, 2026, the staff of the Division of Investment Management (the “staff”) of the Securities and Exchange Commission (the “SEC”) updated its Marketing Compliance-Frequently Asked Questions (“FAQs”) to include two new FAQs on Rule 206(4)-1 under the Investment Advisers Act of 1940 (the “Marketing Rule”). The first new FAQ addresses the use of “model” advisory fees versus “actual” advisory fees in calculating performance, and the second addresses potential self-regulatory, organization-related disqualifications under the testimonial and endorsement section of the Marketing Rule. We summarize these new FAQs below.

Background

The SEC adopted sweeping amendments to the Marketing Rule in March of 2021. Immediately afterward, the staff published the first FAQ (regarding the compliance date for the amendments), and a month later the staff published another FAQ (regarding performance time periods). Although numerous interpretive matters surrounded the amendments, the industry would wait almost another three years, until February 2024, for the next FAQ, which addressed certain private fund performance calculations (including internal rate of return calculations). Following that, the staff added two FAQs about a year later, in March 2025, addressing extracted performance and portfolio/investment characteristics. With these latest additions, the FAQs number seven in total.

Use of Model Fees Versus Actual Fees

The question posed in this FAQ is as follows:

Would an investment adviser violate the general prohibitions of Rule 206(4)-1(a) by advertising the net performance of a portfolio that reflects the deduction of the actual fees charged to the portfolio (“actual fees”), when the fees to be charged to the advertisement’s intended audience (“anticipated fees”) are anticipated to be higher than the actual fees charged?

This question is one that many practitioners raised after reviewing footnote 590 in the adopting release, which stated:

If the fee to be charged to the intended audience is anticipated to be higher than the actual fees charged, the adviser must use a model fee that reflects the anticipated fee to be charged in order not to violate the [Marketing Rule’s] general prohibitions.¹ (emphasis added)

This footnote’s messaging was somewhat puzzling, given that for years practitioners and industry participants generally understood that using actual fees was acceptable, and that the staff letters regarding the use of model fees would not prohibit the use of actual fees in the scenario posited in footnote 590.

In its answer to this question, the staff noted that investment advisers have interpreted footnote 590 to categorically require (emphasis added) the presentation of net performance calculated using a model fee and to prohibit the presentation of net performance calculated using actual fees in this situation. It also noted that the Marketing Rule’s general prohibitions are intended to “provide appropriate flexibility and regulatory certainty for advisers considering how to market their investment advisory services” and “[i]n applying the general prohibitions, an adviser should consider the facts and circumstances of each advertisement.”²

The staff’s answer to this question included two elements. First, the staff stated that whether the use of actual fees violates the general prohibitions would depend on all of the facts and circumstances of a specific advertisement, including, but not limited to, relevant disclosures. This answer seems to open the door to the possible use of actual fees in the scenario posited by footnote 590, if accompanied by appropriate disclosures.

The second element of the staff’s response was as follows:

The staff’s view is that advisers may use various means to illustrate the effect of differences between actual fees and anticipated fees on performance.

This seems to indicate that, in addition to appropriate disclosures, an “illustration” of the type described above is needed in order to avoid violating the general prohibitions. The staff’s response did not include detail regarding the substance, content or placement of this “illustration.”

Testimonials and Endorsements – Conditional Carveout to Disqualification for Certain Self-Regulatory Organization Final Orders

The question posed in this FAQ is as follows:

Would the staff recommend enforcement action if an investment adviser compensates a person for a testimonial or endorsement when that person was subject to the entry of a final order by a self-regulatory organization of the type described in section 203(e)(9) of the Advisers Act within the prior 10 years and that person has not been barred or otherwise suspended from acting in any capacity under the rules of that self-regulatory organization?

This FAQ relates to the disqualifications under the testimonial and endorsement section of the Marketing Rule, which prohibits an investment adviser from compensating a person for a testimonial or endorsement (each as defined in the Marketing Rule) if the adviser knows (or, in the exercise of reasonable care, should know) that the person giving the testimonial or endorsement is subject to a “disqualifying event” (as that term is defined in the Marketing Rule) within 10 years prior to the person disseminating an endorsement or testimonial.

Such disqualifying events include, among others, various SEC orders, as well as the entry of any final order by a self-regulatory organization (as defined in the Form ADV Glossary of Terms) (“SRO”)³ based on violations of any laws or regulations that prohibit fraudulent, manipulative, or deceptive conduct. Normally, an adviser is prohibited from compensating any persons against whom such final orders have been issued in connection with making a testimonial or endorsement of the adviser. However, the Marketing Rule provides a conditional carveout to such disqualification for an SEC order or opinion that does not bar, suspend, or prohibit the person subject to the order from acting in any capacity under the federal securities laws, provided that the person is in compliance with the terms of the opinion or order, and the advertisement includes certain disclosures about the disciplinary event. This conditional carveout was limited to qualifying SEC orders and there is no similar exclusion in the Marketing Rule for SRO orders.

Following the rationale for the conditional exclusion for certain SEC orders, as stated in the Adopting Release,⁴ the staff stated that if a SRO has issued an order with respect to a person’s disqualifying conduct, but did not bar or suspend the person or prohibit such person from acting in any capacity in connection with that disqualifying conduct, the staff will not recommend enforcement action if the person engages in activities related to compensated testimonials or endorsements, provided that:

• The sole reason the person is an ineligible person (as defined in the Marketing Rule) is the SRO’s final order;
• The SRO did not expel or suspend the person from membership, bar or suspend the person from association with other members, or prohibit the person from acting in any capacity;
• The person is in compliance with the terms of the SRO’s final order, including, but not limited to, paying disgorgement, prejudgment interest, civil or administrative penalties, and fines; and
• For a period of 10 years following the date of such final order, any advertisement containing the testimonial or endorsement discloses that the person providing the testimonial or endorsement is subject to a SRO order, and includes the order, or a link to the order on the SRO’s website or other public disclosure system, if available.

This relief effectively expands the Marketing Rule conditional disqualifying event carveout to now also include similar SRO orders as the conditions and requirements are substantially similar to those provided for in-scope SEC orders. Other disqualifying events (such as certain criminal convictions and civil actions, CFTC and state regulatory orders) would continue to remain outside the scope of the conditional carveout. 

¹ Investment Adviser Marketing, SEC Release No. IA-5653 [86 Fed. Reg. 13024] (Dec. 22, 2020).

² Id. at 13045.

³ SROs are defined in the ADV Glossary of Terms as “any national securities or commodities exchange, registered securities association, or registered clearing agency.” For example, the Chicago Board of Trade, FINRA and New York Stock Exchange are included in the SRO definition.

⁴ See id. at section II.C.4.e.