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What counts as an "advertisement"
The rule defines "advertisement" broadly. It covers:
- Any direct or indirect communication that offers the adviser's services to current or prospective clients.
- Testimonials, endorsements, and third-party ratings (with conditions).
- Performance presentations.
- Hypothetical performance.
- Targeted communications to current clients about new services.
One-on-one communications addressing only the recipient's account are generally excluded.
Testimonials and endorsements
The rule permits testimonials (from clients) and endorsements (from non-clients) subject to disclosures, oversight, and compensation rules:
- Disclosure that the person is a client (testimonial) or a non-client (endorsement).
- Disclosure of any compensation paid for the testimonial or endorsement.
- Adviser oversight of the content.
- A written agreement when compensation exceeds de minimis levels.
Performance presentations
Performance must be presented fairly and without distortion. Specific requirements include:
- Net of fees as the prominent figure when net is presented at all.
- Time periods consistent with the firm's standard performance reporting.
- Clear identification of the performance type (gross, net, model, hypothetical, composite).
- Hypothetical performance can only be presented to specific intended audiences with disclosures and policies governing its use.
Common deficiencies
- Cherry-picked time periods that show favorable performance only.
- Net-of-fees vs. gross-of-fees confusion.
- Testimonials without the required disclosures or compensation transparency.
- Hypothetical performance shown to broad retail audiences without the required tailoring.
- Materials retained as drafts without the SEC-required books-and-records retention.
How StratiFi thinks about the Marketing Rule
The rule is detailed but the underlying question is simple: would a reasonable person reading this material come away with an accurate impression of the firm's services and results? The firms that pass examinations on marketing materials are the ones with a defined review-and-approval workflow that connects every public-facing piece to the underlying support data, retains both, and reviews them annually for continued accuracy.
Frequently asked questions
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Can advisers use client testimonials?
Yes, since the 2021 rule update — but with required disclosures (client status, any compensation), adviser oversight, and a written agreement when paid compensation exceeds de minimis levels. -
Does the rule cover social media?
Yes. Any social-media post that offers advisory services or contains performance information is an advertisement under the rule. The same disclosure and recordkeeping requirements apply. -
Are LinkedIn endorsements covered?
Generally yes if they relate to advisory services. Advisers must monitor and, where appropriate, restrict or take down endorsements on their professional profiles.