SEC Investment Adviser Rule 206 Compliance-First Marketing Guide

SEC Investment Adviser Rule 206(4)-1, commonly known as the Marketing Rule, fundamentally transformed how investment advisers approach advertising and client communications when it became effective in May 2021. This comprehensive regulation replaced the decades-old advertising rule and expanded the definition of "advertisement" to include virtually all communications made by investment advisers to more than one person. The rule establishes strict requirements for substantiation, disclosure, and record-keeping that directly impact every aspect of compliance-first marketing for financial institutions.

This article explores SEC Investment Adviser Rule 206(4)-1 within the broader context of compliance-first marketing for financial institutions, providing investment advisers with actionable guidance for implementing marketing strategies that satisfy regulatory requirements while achieving business objectives.

Key Summary: SEC Rule 206(4)-1 requires investment advisers to substantiate all marketing claims, maintain comprehensive records, and implement robust compliance procedures for all client communications and promotional materials.

Key Takeaways:

• The Marketing Rule applies to all investment adviser communications to more than one person, including social media, websites, and presentations
• All performance claims must include required disclosures and meet specific calculation standards
• Testimonials and endorsements require detailed disclosures about compensation and conflicts of interest
• Advisers must maintain books and records documenting compliance with all marketing rule requirements
• Third-party ratings and awards must meet specific disclosure and substantiation standards
• Books and records requirements extend to all marketing materials and supporting documentation
• Compliance procedures must address review, approval, and ongoing monitoring of all marketing activities

What Is SEC Investment Adviser Rule 206(4)-1?

SEC Rule 206(4)-1 under the Investment Advisers Act of 1940 establishes comprehensive requirements governing how registered investment advisers communicate with prospective and existing clients. The rule prohibits investment advisers from engaging in fraudulent, deceptive, or manipulative practices in their marketing activities and establishes specific requirements for various types of marketing content.

The rule defines an "advertisement" as any direct or indirect communication an investment adviser makes to more than one person that offers the investment adviser's services or seeks to obtain or retain one or more investment advisory clients. This broad definition encompasses traditional marketing materials, websites, social media posts, presentations to multiple prospects, and virtually any communication distributed to multiple recipients.

Investment Adviser Marketing Rule: A comprehensive SEC regulation that governs all communications by investment advisers to more than one person, establishing requirements for substantiation, disclosure, and record-keeping of marketing materials. SEC Release IA-5653

The rule operates on a principles-based approach rather than prescriptive requirements, focusing on preventing misleading communications while allowing advisers flexibility in their marketing approaches. However, this flexibility comes with increased responsibility for advisers to ensure their marketing practices comply with the rule's general prohibitions and specific requirements.

Key Components of the Marketing Rule

The Marketing Rule contains several interconnected components that work together to create a comprehensive regulatory framework:

• General Prohibitions: Broad restrictions against false, misleading, or deceptive communications
• Specific Prohibitions: Detailed restrictions on performance advertising, testimonials, and third-party ratings
• Required Disclosures: Mandatory information that must accompany certain types of marketing content
• Substantiation Requirements: Documentation standards for all marketing claims and representations
• Books and Records: Comprehensive record-keeping obligations for all marketing activities

How Does the Marketing Rule Differ from Previous Advertising Regulations?

The Marketing Rule represents a fundamental shift from the previous Investment Adviser Act Rule 206(4)-1, which relied heavily on specific prohibitions and bright-line rules. The previous rule, adopted in 1961, prohibited specific types of content including testimonials, past specific recommendations, and certain performance presentations, but provided limited guidance on evolving marketing channels.

Under the previous rule, investment advisers faced significant restrictions that often prevented them from using modern marketing techniques and digital channels effectively. The old rule's prohibition on testimonials, for example, made it difficult for advisers to leverage client feedback or third-party endorsements in their marketing efforts.

Comparison: Old Rule vs. New Marketing Rule

Previous Rule (Pre-2021):

• Approach: Prescriptive prohibitions with limited flexibility
• Scope: Traditional advertising materials and communications
• Testimonials: Generally prohibited with limited exceptions
• Performance: Restricted presentation formats with specific exclusions
• Third-Party Content: Limited guidance on ratings and rankings

Current Marketing Rule (2021-Present):

• Approach: Principles-based with extensive disclosure requirements
• Scope: All communications to more than one person, including digital channels
• Testimonials: Permitted with comprehensive disclosure requirements
• Performance: Flexible presentation with standardized calculation and disclosure requirements
• Third-Party Content: Detailed framework for ratings, rankings, and endorsements

Impact on Digital Marketing Strategies

The Marketing Rule's expanded scope particularly impacts digital marketing strategies that were not contemplated under the previous rule. Social media marketing, content marketing, and influencer partnerships now fall clearly within the rule's requirements, requiring advisers to implement comprehensive compliance procedures for these channels.

Investment advisers working with specialized agencies like WOLF Financial must ensure their digital marketing partners understand these expanded requirements and can provide appropriate compliance oversight for campaigns across multiple digital channels.

What Are the General Prohibitions Under the Marketing Rule?

The Marketing Rule establishes seven general prohibitions that apply to all investment adviser marketing activities. These prohibitions are designed to prevent advisers from making false, misleading, or deceptive statements in their marketing materials, regardless of the specific format or distribution channel.

These general prohibitions require advisers to evaluate every marketing communication for potential violations, considering both the explicit content and the overall impression created by the material. The SEC has emphasized that compliance requires considering the "net impression" of marketing materials from the perspective of the intended audience.

The Seven General Prohibitions

Investment advisers are prohibited from including any untrue statement of material fact or omitting material facts that make statements misleading:

1. False or Misleading Statements: Any statement that is factually incorrect or creates a misleading impression about the adviser's services, performance, or qualifications
2. Material Omissions: Failing to include information necessary to prevent other statements from being misleading
3. References to Specific Past Recommendations: Discussing particular investment recommendations unless specific conditions and disclosures are met
4. Performance Claims Without Required Disclosures: Presenting performance information without accompanying required disclosures and contextual information
5. Testimonials and Endorsements Without Compliance: Including client testimonials or third-party endorsements without meeting disclosure and procedural requirements
6. Third-Party Ratings Without Substantiation: Using awards, ratings, or rankings without proper substantiation and disclosure
7. Misleading Implications About SEC Approval: Statements that imply SEC approval, endorsement, or sponsorship of the adviser

Material Fact: Information that a reasonable investor would consider important in making an investment decision, including information about risks, fees, performance, and potential conflicts of interest. SEC Disclosure Guidance

How Should Investment Advisers Handle Performance Advertising?

Performance advertising under the Marketing Rule requires investment advisers to present performance information in a manner that is not false or misleading while meeting specific calculation and disclosure requirements. The rule permits advisers to advertise performance but establishes detailed standards for how performance must be calculated, presented, and contextualized.

All performance advertisements must include relevant information about the calculation methodology, time periods, and any limitations or assumptions that materially affect the performance presentation. The rule requires advisers to consider whether additional information is necessary to prevent the performance presentation from being misleading.

Required Performance Disclosures

Investment advisers must include specific disclosures with all performance advertisements to provide appropriate context and prevent misleading impressions:

• Calculation Methodology: Clear explanation of how performance was calculated, including any assumptions or limitations
• Time Period Selection: Disclosure of the criteria used to select the time periods presented
• Fee Impact: Information about the impact of advisory fees on performance results
• Benchmark Comparison: When benchmarks are used, disclosure of the benchmark's characteristics and any material differences
• Risk Factors: Discussion of material risks that could affect future performance
• Account Selection: If presenting model or composite performance, explanation of the accounts or strategies included

Gross vs. Net Performance Presentation

The Marketing Rule allows investment advisers to present both gross and net performance, but requires clear disclosure about fee deductions and their impact on returns. When presenting gross performance, advisers must include information about the adviser's fees and their potential impact on client returns.

Net performance presentations must clearly indicate which fees have been deducted and provide enough information for prospective clients to understand how fees would affect their potential returns. Many compliance-focused marketing agencies recommend presenting both gross and net performance with clear labeling to provide complete transparency.

What Are the Requirements for Testimonials and Endorsements?

The Marketing Rule permits investment advisers to use testimonials and endorsements in their marketing materials, representing a significant change from the previous rule's general prohibition. However, these materials must comply with extensive disclosure requirements and procedural safeguards designed to prevent misleading impressions.

Testimonials include any statement by a current or former client about the adviser or its services, while endorsements are statements by non-clients who receive compensation for promoting the adviser. Both categories require specific disclosures about the nature of the relationship and any compensation provided.

Testimonial: Any statement of a client's experience with or endorsement of an investment adviser, including statements about the adviser's services, performance, or characteristics. SEC Marketing Rule Release

Required Testimonial Disclosures

All testimonials must include clear and prominent disclosure of the following information:

• Compensation Status: Clear statement about whether the testimonial provider received compensation
• Relationship Nature: Description of any material connections between the testimonial provider and the adviser
• Selection Criteria: If testimonials were selected based on specific criteria, disclosure of those criteria
• Performance Claims: If the testimonial includes performance information, all required performance disclosures
• Conflicts of Interest: Any material conflicts of interest between the testimonial provider and the adviser

Oversight Requirements for Testimonials

Investment advisers must implement procedures to ensure testimonials comply with the Marketing Rule requirements throughout their use. This includes initial review and approval processes as well as ongoing monitoring to ensure testimonials remain accurate and compliant.

Advisers must also establish procedures for handling situations where testimonial providers' circumstances change in ways that could affect the accuracy or appropriateness of their statements. For example, if a client providing a testimonial experiences significant losses, the adviser may need to reevaluate whether continued use of the testimonial would be misleading.

How Do Third-Party Ratings and Awards Requirements Work?

Third-party ratings, rankings, and awards can be included in investment adviser marketing materials under the Marketing Rule, but they must meet specific substantiation and disclosure requirements. The rule recognizes that these materials can provide valuable information to prospective clients while establishing safeguards against misleading presentations.

Investment advisers must be able to substantiate any third-party ratings or awards they include in marketing materials and must provide appropriate context to prevent misleading impressions. The rule requires disclosure of the criteria used to determine the rating or award and any compensation paid to the rating organization.

Required Disclosures for Third-Party Materials

All third-party ratings, rankings, and awards must include the following disclosures:

• Rating Criteria: Explanation of the criteria and methodology used to determine the rating or award
• Time Period: The time period for which the rating or award applies
• Compensation Disclosure: Whether the adviser paid fees to participate in the rating process
• Selection Universe: Information about the universe of advisers considered for the rating or award
• Limitations: Any material limitations of the rating methodology or data sources

Third-Party Rating: A rating, ranking, or similar classification of an investment adviser provided by a person other than the adviser, typically based on quantitative or qualitative criteria related to the adviser's performance, services, or characteristics.

What Books and Records Must Investment Advisers Maintain?

The Marketing Rule establishes comprehensive books and records requirements that extend beyond the marketing materials themselves to include all supporting documentation and evidence of compliance procedures. Investment advisers must maintain detailed records demonstrating compliance with all aspects of the Marketing Rule for examination by SEC staff.

These record-keeping requirements serve multiple purposes: they enable regulatory examination and enforcement, support the adviser's compliance monitoring activities, and provide documentation for any disputes or questions about marketing practices. The records must be maintained for five years after the marketing material was last used.

Required Marketing Records

Investment advisers must maintain the following categories of records related to their marketing activities:

• Marketing Materials: All advertisements and marketing communications, including digital content and social media posts
• Substantiation Documentation: All information relied upon to substantiate claims made in marketing materials
• Performance Calculations: Detailed documentation of all performance calculations and supporting data
• Testimonial Documentation: Records related to testimonials and endorsements, including compensation arrangements
• Third-Party Materials: Documentation supporting any third-party ratings, awards, or endorsements used
• Review and Approval Records: Documentation of the review and approval process for all marketing materials
• Distribution Records: Records of when, where, and how marketing materials were distributed or published

Digital Marketing Record-Keeping Challenges

Digital marketing channels present unique record-keeping challenges due to the volume of content and the dynamic nature of digital platforms. Social media marketing requires advisers to capture and preserve posts, comments, and interactions that may be automatically deleted or modified by platforms.

Investment advisers working with digital marketing agencies must ensure their service providers maintain appropriate records and can provide documentation of all marketing activities. This includes screenshots of social media content, email campaigns, and website updates that demonstrate compliance with the Marketing Rule.

How Should Advisers Implement Compliance Procedures?

Effective compliance with the Marketing Rule requires investment advisers to implement comprehensive written policies and procedures that address all aspects of their marketing activities. These procedures must be tailored to the adviser's specific business model, marketing channels, and risk profile while ensuring consistent application of the rule's requirements.

The compliance procedures should establish clear roles and responsibilities for marketing compliance, including designation of qualified personnel to review and approve marketing materials. Many advisers benefit from working with compliance consultants or specialized marketing agencies that understand the regulatory requirements and can provide ongoing oversight.

Essential Elements of Marketing Compliance Procedures

Investment adviser marketing compliance procedures should address the following key areas:

1. Content Review and Approval: Procedures for reviewing and approving all marketing materials before distribution
2. Substantiation Requirements: Standards for documenting and maintaining support for all marketing claims
3. Performance Presentation: Specific procedures for calculating, reviewing, and presenting performance information
4. Testimonial Management: Processes for obtaining, reviewing, and monitoring testimonials and endorsements
5. Digital Marketing Oversight: Procedures for managing social media, website content, and other digital marketing channels
6. Record-Keeping Systems: Systems for maintaining and organizing all required marketing records
7. Periodic Review: Regular review and updating of marketing materials and compliance procedures
8. Training Programs: Training for personnel involved in marketing activities and compliance oversight

Technology Solutions for Marketing Compliance

Many investment advisers implement technology solutions to support their Marketing Rule compliance efforts, including content management systems that provide approval workflows, archive capabilities, and audit trails. These systems can help automate record-keeping requirements and ensure consistent application of compliance procedures across all marketing channels.

Advanced compliance technology can also provide real-time monitoring of digital marketing activities, alerting compliance personnel to potential issues and ensuring prompt response to any compliance concerns. Integration with existing compliance management systems can provide a comprehensive view of all regulatory obligations.

What Common Mistakes Should Advisers Avoid?

Investment advisers commonly encounter several categories of Marketing Rule violations that can be prevented through proper understanding of the requirements and implementation of effective compliance procedures. These mistakes often stem from misunderstanding the rule's broad scope or failing to adapt traditional marketing practices to the new requirements.

The SEC has provided guidance through examination findings and enforcement actions that highlight common compliance deficiencies. Understanding these common mistakes can help advisers focus their compliance efforts on the highest-risk areas and implement preventive measures.

Performance Presentation Errors

Performance advertising mistakes represent one of the most common Marketing Rule violations, often involving inadequate disclosures or misleading presentation of returns:

• Cherry-Picked Time Periods: Presenting performance for favorable time periods without disclosure of selection criteria
• Inadequate Fee Disclosure: Failing to clearly explain the impact of fees on presented performance
• Benchmark Misrepresentation: Using inappropriate benchmarks or failing to explain benchmark differences
• Model Performance Issues: Presenting hypothetical or model performance without adequate disclaimers
• Incomplete Composite Data: Failing to include all appropriate accounts in composite performance calculations

Testimonial and Endorsement Violations

Testimonial-related violations often involve inadequate disclosures or failure to implement proper oversight procedures:

• Missing Compensation Disclosures: Failing to disclose payments or other compensation to testimonial providers
• Inadequate Conflict Disclosure: Not disclosing material relationships or conflicts of interest
• Outdated Testimonials: Continuing to use testimonials that are no longer accurate or appropriate
• Performance Claims in Testimonials: Including client performance information without required disclosures
• Insufficient Oversight: Lacking procedures to monitor and update testimonial content

How Does the Marketing Rule Apply to Digital Channels?

Digital marketing channels, including social media, websites, email campaigns, and online advertising, are fully subject to the Marketing Rule's requirements. The rule's broad definition of "advertisement" encompasses all digital communications made to more than one person, requiring advisers to apply the same compliance standards to digital content as traditional marketing materials.

Digital channels present unique compliance challenges due to character limits, real-time interaction capabilities, and the informal nature of many digital platforms. Investment advisers must adapt their compliance procedures to address these challenges while maintaining full compliance with the Marketing Rule.

Digital Marketing Compliance: The application of Marketing Rule requirements to online channels including social media, websites, email, and digital advertising, requiring the same level of substantiation, disclosure, and oversight as traditional marketing materials.

Social Media Compliance Considerations

Social media marketing requires particular attention to the Marketing Rule's requirements due to platform limitations and the informal nature of social communication:

• Character Limitations: Adapting required disclosures to platform character limits while maintaining compliance
• Interactive Content: Managing compliance for interactive features like comments, shares, and real-time discussions
• Third-Party Content: Addressing liability for third-party posts, shares, and comments on adviser social media accounts
• Platform Changes: Monitoring platform updates that could affect compliance procedures or record-keeping capabilities
• Multi-Platform Consistency: Ensuring consistent compliance across different social media platforms with varying capabilities

Agencies specializing in financial services social media, such as WOLF Financial, build Marketing Rule compliance into every campaign element, from initial content creation through ongoing monitoring and record-keeping across multiple platforms.

Website and Content Marketing Requirements

Investment adviser websites and content marketing efforts must comply with all Marketing Rule requirements, including performance presentation standards, testimonial requirements, and general prohibitions against misleading content. Website compliance requires ongoing monitoring as content is updated and modified.

Content marketing strategies, including blog posts, whitepapers, and educational materials, must be evaluated for compliance even when they appear to be purely educational. Any content that could be viewed as promoting the adviser's services or seeking to obtain clients falls within the Marketing Rule's scope.

What Enforcement Actions Have Highlighted Key Requirements?

SEC enforcement actions under the Marketing Rule provide important guidance about regulatory priorities and common compliance deficiencies. These cases illustrate how the SEC applies the rule's principles-based approach and demonstrate the consequences of inadequate compliance procedures.

Early enforcement actions have focused on advisers who failed to adapt their marketing practices to the new rule's requirements or who implemented inadequate compliance procedures. The SEC has emphasized that good faith efforts to comply are insufficient if the procedures are ineffective or not properly implemented.

Notable Enforcement Themes

SEC enforcement actions have highlighted several recurring themes that indicate regulatory priorities:

• Inadequate Substantiation: Cases involving advisers who could not support claims made in marketing materials
• Performance Presentation Deficiencies: Violations related to misleading performance presentations or inadequate disclosures
• Testimonial Oversight Failures: Cases involving inadequate procedures for managing testimonials and endorsements
• Record-Keeping Violations: Enforcement actions for failing to maintain required books and records
• Digital Marketing Compliance: Cases involving social media and other digital marketing violations

Lessons from Enforcement Actions

Investment advisers can draw several important lessons from SEC enforcement actions under the Marketing Rule:

1. Documentation Is Critical: The SEC expects comprehensive documentation of all compliance efforts and substantiation for all marketing claims
2. Procedures Must Be Effective: Having written procedures is insufficient if they are not properly implemented or regularly updated
3. Digital Channels Require Equal Attention: The SEC applies the same standards to digital marketing as traditional channels
4. Context Matters: The "net impression" of marketing materials is evaluated from the target audience's perspective
5. Ongoing Monitoring Is Required: Compliance is an ongoing obligation that requires regular review and updating of marketing materials

How Should Advisers Prepare for SEC Examinations?

SEC examinations focusing on Marketing Rule compliance require investment advisers to demonstrate comprehensive compliance with all aspects of the rule through detailed documentation and evidence of effective procedures. Examination preparation should be an ongoing process rather than a reactive response to examination notifications.

Effective examination preparation involves organizing all marketing-related records, documenting compliance procedures, and ensuring personnel can explain the adviser's marketing practices and compliance efforts. The SEC examination staff will expect to see evidence of consistent application of the rule's requirements across all marketing channels and materials.

Examination Document Requests

SEC examinations typically request the following categories of documents related to Marketing Rule compliance:

• All Marketing Materials: Every advertisement, brochure, website page, and digital marketing content used during the examination period
• Compliance Policies: Written procedures addressing Marketing Rule compliance and evidence of their implementation
• Substantiation Files: Documentation supporting all claims made in marketing materials
• Performance Records: Detailed calculations and supporting data for all performance presentations
• Testimonial Documentation: All records related to testimonials, endorsements, and compensation arrangements
• Review and Approval Documentation: Evidence of the review and approval process for marketing materials
• Training Records: Documentation of training provided to personnel on Marketing Rule compliance

Best Practices for Examination Readiness

Investment advisers can enhance their examination readiness by implementing ongoing compliance monitoring and documentation practices:

1. Centralized Record-Keeping: Maintain all marketing records in organized, easily accessible systems
2. Regular Compliance Testing: Conduct periodic reviews of marketing materials and compliance procedures
3. Staff Training: Ensure all personnel understand their Marketing Rule obligations and can explain compliance procedures
4. External Reviews: Consider periodic independent reviews of marketing compliance programs
5. Technology Documentation: Maintain records of technology systems used for marketing compliance and their validation

What Are the Integration Requirements with Other Regulations?

The Marketing Rule must be implemented in coordination with other applicable regulations that govern investment adviser activities, including FINRA rules for dual registrants, state regulations for state-registered advisers, and federal securities laws related to client communications. Investment advisers must ensure their marketing compliance procedures address all applicable regulatory requirements without conflicts or gaps.

Integration challenges are particularly complex for advisers who are also registered as broker-dealers, as they must comply with both SEC Marketing Rule requirements and FINRA advertising and communications rules. These dual registrants must implement procedures that satisfy the requirements of both regulatory frameworks.

Dual Registrant: A firm that is registered as both an investment adviser with the SEC and as a broker-dealer with FINRA, requiring compliance with both SEC and FINRA marketing and communications rules simultaneously.

FINRA Rule 2210 Coordination

Investment advisers who are also FINRA members must ensure their marketing materials comply with both the SEC Marketing Rule and FINRA Rule 2210. While these rules share similar objectives, they contain different specific requirements and definitions that must be carefully navigated:

• Approval Requirements: FINRA may require principal approval for communications that are not required under the Marketing Rule
• Filing Obligations: FINRA requires filing of certain retail communications that may not trigger SEC filing requirements
• Content Standards: Some FINRA content standards may be more restrictive than Marketing Rule requirements
• Record-Keeping Differences: FINRA and SEC record-keeping requirements may have different retention periods or documentation standards

State Law Considerations

State-registered investment advisers must comply with both the federal Marketing Rule and applicable state regulations governing adviser marketing and advertising. State requirements may impose additional restrictions or procedural requirements that exceed federal standards.

Even SEC-registered advisers must consider state law requirements in states where they conduct business, as some states impose additional obligations on investment advisers marketing to residents of those states.

Frequently Asked Questions

Basics

1. What types of communications are covered by the Marketing Rule?

The Marketing Rule applies to any direct or indirect communication an investment adviser makes to more than one person that offers advisory services or seeks to obtain or retain clients. This includes websites, social media posts, brochures, presentations to multiple prospects, email campaigns, and any other marketing communications.

2. Does the Marketing Rule apply to communications with existing clients?

Yes, the Marketing Rule applies to communications with existing clients if the communication is made to more than one person. However, individual communications to single clients are not considered advertisements under the rule.

3. Are there exemptions for small investment advisers?

No, the Marketing Rule applies to all SEC-registered investment advisers regardless of size. State-registered advisers are subject to state advertising regulations, which may incorporate Marketing Rule principles.

4. What is considered a "material fact" under the Marketing Rule?

A material fact is information that a reasonable investor would consider important in making an investment decision, including information about risks, fees, performance, conflicts of interest, and the adviser's qualifications or experience.

5. How does the Marketing Rule define "advertisement"?

An advertisement is any direct or indirect communication by an investment adviser to more than one person that offers the adviser's services or seeks to obtain or retain one or more investment advisory clients, including digital communications and third-party content.

How-To

6. How should advisers calculate performance for marketing purposes?

Performance must be calculated using methodologies that provide fair and balanced presentations. Advisers should use time-weighted returns for most presentations, include all appropriate accounts in composites, and clearly disclose the calculation methodology and any limitations.

7. How can advisers use testimonials in their marketing materials?

Testimonials are permitted but must include clear disclosures about any compensation provided to the testimonial provider, material relationships with the adviser, and any conflicts of interest. Advisers must also implement oversight procedures to ensure testimonials remain accurate and appropriate.

8. How should advisers handle social media compliance?

Social media content must comply with all Marketing Rule requirements, including substantiation of claims and required disclosures. Advisers should implement procedures for content review and approval, maintain records of all social media activities, and monitor for compliance with character limitations and platform-specific requirements.

9. How long must marketing records be maintained?

Investment advisers must maintain all marketing records for five years after the marketing material was last used. Records must be maintained in an organized manner and be readily accessible for examination by SEC staff.

10. How should advisers substantiate marketing claims?

All marketing claims must be supported by adequate documentation that can be produced during an examination. This includes performance calculations, third-party verification of awards or ratings, documentation of adviser qualifications, and any other information relied upon to support marketing representations.

Comparison

11. What is the difference between testimonials and endorsements?

Testimonials are statements by current or former clients about their experience with the adviser, while endorsements are statements by non-clients who may receive compensation for promoting the adviser. Both require disclosures, but the specific disclosure requirements differ based on the relationship and compensation arrangements.

12. How does the Marketing Rule differ from FINRA communications rules?

While both rules aim to prevent misleading communications, the Marketing Rule uses a principles-based approach with extensive disclosure requirements, while FINRA Rule 2210 includes more prescriptive content standards and approval requirements. Dual registrants must comply with both sets of requirements.

13. What is the difference between gross and net performance presentation?

Gross performance shows returns before deducting advisory fees, while net performance shows returns after fee deduction. Both presentations are permitted but require clear disclosure about which fees have been deducted and the potential impact of fees on client returns.

Troubleshooting

14. What should advisers do if they discover marketing materials that may not comply?

Advisers should immediately cease using potentially non-compliant materials, conduct a thorough review of all marketing content, implement corrective measures, and consider whether disclosure to clients or regulators is appropriate. Document all remedial actions taken.

15. How should advisers handle testimonials from clients who later experience losses?

Advisers should implement procedures to monitor the ongoing appropriateness of testimonials. If a client providing a testimonial experiences significant losses or other changes that could make the testimonial misleading, the adviser should evaluate whether continued use is appropriate and may need to discontinue use.

16. What if platform limitations prevent full compliance disclosures?

Platform limitations do not excuse compliance obligations. Advisers must adapt their marketing approaches to ensure full compliance within platform constraints, which may include using links to additional disclosure information or choosing not to use platforms that cannot accommodate required disclosures.

17. How should advisers handle user-generated content on their social media accounts?

Advisers may be responsible for third-party content posted on their social media accounts. Implement moderation procedures, establish clear social media policies, and consider whether endorsing or sharing third-party content creates compliance obligations.

Advanced

18. How should advisers handle model or hypothetical performance presentations?

Model or hypothetical performance must include prominent disclosures that the performance is not based on actual client accounts, explain the limitations and assumptions used in the model, and provide sufficient information to prevent misleading impressions about likely future results.

19. What are the requirements for presenting composite performance?

Composite performance must include all accounts that meet the composite definition criteria, use consistent calculation methodologies, and include appropriate disclosures about the composite construction and any accounts excluded from the composite.

20. How should advisers handle performance presentations during market volatility?

During volatile markets, advisers should ensure performance presentations include appropriate context about market conditions, consider whether additional risk disclosures are necessary, and evaluate whether performance presentations remain representative of likely future results.

Compliance/Risk

21. What are the potential penalties for Marketing Rule violations?

Violations can result in cease and desist orders, financial penalties, remedial actions, and reputational damage. The SEC considers factors such as the severity of violations, harm to investors, and the adviser's compliance history when determining appropriate sanctions.

22. How should advisers document their compliance efforts?

Maintain comprehensive records of compliance procedures, training programs, review and approval processes, and any remedial actions taken. Documentation should demonstrate consistent application of compliance procedures and ongoing monitoring of marketing activities.

23. What should advisers expect during a Marketing Rule examination?

Expect requests for all marketing materials, compliance procedures, substantiation documentation, performance calculations, testimonial records, and evidence of ongoing compliance monitoring. Be prepared to explain how the adviser ensures ongoing compliance with all rule requirements.

24. How should advisers handle conflicts of interest in marketing materials?

All material conflicts of interest must be clearly disclosed in marketing materials. Consider whether additional context is necessary to prevent misleading impressions and ensure disclosures are prominent and understandable to the target audience.

25. What are the record-keeping requirements for digital marketing activities?

Digital marketing records must include all content published, distribution records, approval documentation, and any supporting substantiation. For social media, maintain screenshots or other records of content that may be automatically deleted or modified by platforms.

Conclusion

SEC Investment Adviser Rule 206(4)-1 represents a fundamental evolution in how investment advisers approach marketing compliance, shifting from prescriptive prohibitions to a principles-based framework that emphasizes transparency, substantiation, and comprehensive disclosure. The rule's broad scope encompassing all communications to more than one person requires advisers to implement robust compliance procedures across traditional and digital marketing channels while maintaining detailed documentation of all compliance efforts.

When evaluating Marketing Rule compliance, investment advisers should consider the comprehensiveness of their written procedures, the effectiveness of their review and approval processes, the adequacy of their record-keeping systems, the training provided to marketing personnel, and their ongoing monitoring capabilities. Success requires treating compliance as an integral part of marketing strategy rather than a separate regulatory obligation.

For investment advisers seeking to develop Marketing Rule-compliant promotional strategies while maximizing their marketing effectiveness, explore WOLF Financial's comprehensive compliance and marketing services designed specifically for institutional finance clients.

References

1. Securities and Exchange Commission. "Investment Adviser Marketing Rule." Federal Register, Vol. 86, No. 9, January 2021. https://www.sec.gov/rules/final/2020/ia-5653.pdf
2. Securities and Exchange Commission. "Marketing Rule for Investment Advisers - Frequently Asked Questions." SEC Division of Investment Management, 2021. https://www.sec.gov/investment/marketing-faq
3. Investment Adviser Association. "Marketing Rule Implementation Guide." IAA Compliance Resources, 2021. https://www.investmentadviser.org/resources/marketing-rule
4. Securities and Exchange Commission. "Books and Records Requirements for Investment Advisers." Code of Federal Regulations, Title 17, Section 275.204-2. https://www.ecfr.gov/current/title-17/chapter-II/part-275/section-275.204-2
5. Financial Industry Regulatory Authority. "Rule 2210: Communications with the Public." FINRA Rulebook. https://www.finra.org/rules-guidance/rulebooks/finra-rules/2210
6. Securities and Exchange Commission. "Disclosure Guidance and Sample Letter for Public Companies." Division of Corporation Finance, 2020. https://www.sec.gov/corpfin/cf-disclosure-guidance-topic-2
7. CFA Institute. "Global Investment Performance Standards (GIPS)." CFA Institute Performance Standards, 2020. https://www.cfainstitute.org/en/ethics-standards/codes/gips-standards
8. Securities and Exchange Commission. "Investment Advisers Act of 1940." United States Code, Title 15, Chapter 2D. https://www.sec.gov/about/laws/iaa40.pdf
9. North American Securities Administrators Association. "Model Rules for Investment Adviser Marketing." NASAA Model Legislation, 2021. https://www.nasaa.org/industry-resources/investment-advisers/
10. Securities and Exchange Commission. "Risk Alert: Observations from Investment Adviser Marketing Rule Examinations." Office of Compliance Inspections and Examinations, 2022. https://www.sec.gov/files/investment-adviser-marketing-risk-alert.pdf

Important Disclaimers

Disclaimer: Educational information only. Not financial, legal, medical, or tax advice.

Risk Warnings: All investments carry risk, including loss of principal. Past performance is not indicative of future results.

Conflicts of Interest: This article may contain affiliate links; see our disclosures.

Publication Information: Published: 2025-11-03 · Last updated: 2025-11-03T00:00:00Z

About the Author

Author: Gav Blaxberg, Founder, WOLF Financial
LinkedIn Profile