The SEC Marketing Rule for small advisers

Rule 206(4)-1 binds an investment adviser “registered or required to be registered” with the SEC. It is the SEC's rule, so it does not reach a state-registered adviser by its own terms; if your firm is registered with a state, ask your counsel which advertising rules apply to you. If you are SEC-registered, every advertisement you put out, “directly or indirectly”, must clear four paragraphs: the general prohibitions, the testimonial and endorsement conditions, the third-party rating conditions and the performance rules.

The SEC adopted it as “a merged rule that will replace both the current advertising and cash solicitation rules”, which dated from 1961 and 1979. Paying someone to refer clients used to be a separate rule; it is now the endorsement part of this one. The same release changed Form ADV to collect information about advisers' marketing practices and amended the books and records rule, which is why marketing shows up in Form ADV and in your files as well as in your ads.

The rule took effect on May 4, 2021. The release set the compliance date “eighteen months following the effective date”, and the SEC staff's Marketing Compliance FAQ names it: November 4, 2022. Any advertisement a registered adviser has put out since then is judged under this rule. The staff FAQ is useful reading, with one caution it states itself: its answers “have no legal force or effect”.

Everything else in the rule hangs on one definition, and it has two halves. The first catches communications that sell your services. The second catches paid testimonials and endorsements wherever they appear.

Read it as three tests. Does it go to more than one person, or carry hypothetical performance? Does it offer advisory services to prospects, or new services to existing clients? Is it outside the three carve-outs: “Extemporaneous, live, oral communications”, information in a required notice or filing, and hypothetical performance given in answer to an unsolicited request (or one-on-one to a private fund investor)? The second half, paragraph (e)(1)(ii), adds “Any endorsement or testimonial for which an investment adviser provides compensation, directly or indirectly”, whether or not it offers anything.

A small firm's week has plenty of borderline pieces. The table sorts seven common ones by the words of the definition. It is our reading, not a ruling; where it says “Depends”, the facts of your piece decide.

The record duty is wider than the definition. Paragraph (a)(11) of the books and records rule asks for a copy of each advertisement and also of any notice, circular, investment letter or bulletin the firm sends “to ten or more persons (other than persons associated with such investment adviser)”. So the quarterly letter that is not an ad still goes in the file. Posts on the firm's social accounts reach many people too, which is why firms that post look at social media archiving software. The full rule text is on eCFR, 17 CFR 275.206(4)-1.

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Paragraph (a) applies to every advertisement, with or without testimonials or performance. It is a principles test, so it cannot be passed with a disclaimer stamped at the bottom. The card turns each prohibition into the question a reviewer asks of a draft.

The second one changes how a small firm works more than any other. An advertisement may not include “a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate upon demand by the Commission.” “Twenty years of experience”, “clients in 30 states”, “fee-only”: each one needs a source you can produce later. The cheapest habit is to save that source in the same folder as the approved ad, on the day it is approved.

The fourth one catches the “benefits” page every adviser website has. Tax-loss harvesting, a rebalancing method, a planning process: each benefit named needs “fair and balanced treatment of any material risks or material limitations”. The Marketing Rule ad review checklist walks a single draft through all seven and lists what to keep with it.

The rule splits praise by who gives it. A testimonial is a statement “by a current client or investor in a private fund advised by the investment adviser” about their experience, or one that solicits or refers. An endorsement is the same kind of statement “by a person other than a current client or investor”: a CPA who refers clients, a former client, a podcast host you pay. Both are allowed. Both carry conditions.

The disclosures, and where they go

Three items must appear “Clearly and prominently” when the statement is put out: whether a client or a non-client gave it, whether cash or non-cash compensation was provided, and a brief statement of any material conflicts of interest. Two more items, the material terms of the compensation and a fuller description of the conflicts, must be disclosed at the same time but need not sit in the ad itself. If they go out separately, keep a record of them: that is paragraph (a)(15)(i) of the books and records rule.

Which conditions apply

The other conditions are “A reasonable basis for believing that the testimonial or endorsement complies”, “A written agreement with any person giving a testimonial or endorsement”, and a bar on paying an “ineligible person”. How many apply depends on the pay and on who is speaking.

De minimis is defined to the dollar: “a total of $1,000 or less (or the equivalent value in non-cash compensation) during the preceding 12 months.” Non-cash thanks count at their equivalent value, so add them up per person over the preceding 12 months. For an employee who promotes the firm, the exemption holds only if the tie is “readily apparent to or is disclosed to” the reader and you document the person's status at the time; their names go on file under (a)(15)(iii).

The disqualification test looks back ten years. A person is ineligible if subject to a disqualifying Commission action or to a disqualifying event “within ten years prior to” the endorsement, and you may not pay them if you know, “or in the exercise of reasonable care should know”, that they are. Before you sign a paid referral agreement, run the check and save what you found with the agreement.

A third-party rating is “a rating or ranking of an investment adviser provided by a person who is not a related person”, where that person rates or ranks “in the ordinary course of its business”. The “top advisers” list in a magazine is the usual case. Putting one in an ad takes two things. First, a reasonable basis that any questionnaire behind it is “structured to make it equally easy for a participant to provide favorable and unfavorable responses, and is not designed or prepared to produce any predetermined result.” Second, clear and prominent disclosure of when it was given, the period it covers, who created and tabulated it, and any compensation you paid in connection with it.

The file behind it holds two documents: a copy of the questionnaire or survey, if you obtain one (paragraph (a)(11)(ii)), and the documentation of your reasonable basis that the rating met paragraph (c)(1) (paragraph (a)(15)(ii)). If the publisher will not tell you how the survey works, you may have little to base that belief on; take it to your compliance counsel before the rating goes into an ad.

Paragraph (d) is where most of the rule's detail sits, and it is written as a list of things an ad may not include unless conditions are met. For a small adviser the common cases are a composite on a fact sheet, a model on a pitch deck, and a manager who brought a track record from a previous firm. The table pairs seven things a draft might show with what the rule adds.

Net beside gross

Gross performance is allowed only if the ad “also presents net performance” with “at least equal prominence”, in a format that makes comparison easy, over the same period and with the same type of return and method. Net means after “all fees and expenses that a client or investor has paid or would have paid” for your advisory services. If you use a model fee, the rule allows two choices: one that leaves the figures no higher than the actual fee would, or one “equal to the highest fee charged to the intended audience”.

One, five and ten years, to the last year-end

Private fund performance is outside this paragraph, and paragraph (d)(6) excuses hypothetical performance from it; other portfolio and composite results are inside it. By our reading of those words, an ad that goes out in October 2026 for a calendar-year composite needs periods ending no earlier than December 31, 2025:

January is the awkward month, because last year's numbers are not ready on January 1. The SEC staff FAQ says the staff would not object if you keep using interim figures (its example is third-quarter numbers) until you can calculate to the year-end, and that a reasonable period to do so “generally would not exceed one month.” It is a staff view, not the rule, so write it into your procedures as a date in the calendar.

Models, backtests and targets

Hypothetical performance is any result “not actually achieved by any portfolio of the investment adviser”, and the rule names three kinds: model portfolios, backtests, and “Targeted or projected performance returns”. It needs policies that keep it “relevant to the likely financial situation and investment objectives of the intended audience”, plus enough information on the criteria, the assumptions, and the risks and limitations for that audience to understand it. One planning point matters to small firms: an interactive tool a client uses to run their own simulations is outside the definition, provided you describe its method, limits and key assumptions, explain that results vary with each use and over time, explain how it picks investments where it does, and say the outcomes are hypothetical.

Two records follow from this paragraph. Every advertised figure needs its backup: the “accounts, books, internal working papers, and any other records or documents that are necessary to form the basis for or demonstrate the calculation”. For managed accounts, keeping all account statements and the worksheets behind the calculation is deemed to satisfy it. And any hypothetical performance needs “A record of who the ‘intended audience’ is”.

The Marketing Rule says what an ad may contain; the books and records rule, 204-2, says what you keep to prove it. Seven records in 204-2 touch marketing.

Advertisements and performance backup carry their own clock. They are kept for “not less than five years, the first two years in an appropriate office of the investment adviser, from the end of the fiscal year during which the investment adviser last published or otherwise disseminated” the communication. So a website page that stays up for four years is kept, by our reading, for five years after the end of the fiscal year in which it finally comes down.

By our reading, a fact sheet last sent out in 2026 by a firm with a December 31 year-end is kept until at least December 31, 2031, in an appropriate office through December 31, 2028. The other marketing records sit under the general period of paragraph (e)(1), five years from the end of the fiscal year of the last entry; that paragraph gives (a)(11) and (a)(16) their own clock but not (a)(15) or (a)(19). The retention calculator works out the dates for any record and year-end. Electronic storage is allowed under 204-2(g); the rule text is on eCFR, 17 CFR 275.204-2.

The rule has no approval step of its own, but the compliance program rule requires policies “reasonably designed to prevent violation” of the Advisers Act and its rules, and a review “no less frequently than annually” of how they work. For a firm of two to ten people, the six steps below are one way to meet both with a single folder per ad. The procedures themselves belong in your Rule 206(4)-7 compliance program.

A firm that is also a broker-dealer runs two regimes: the Marketing Rule for the advisory business and FINRA Rule 2210 for the brokerage side. This guide explains the rule; it is not legal advice. Have your compliance counsel check your procedures against the full text of Rule 206(4)-1, and see the wider program in RIA compliance.