Marketing Rule ad review checklist
Name the ad, tick what it contains (a testimonial, an endorsement, a third-party rating, performance gross or net, hypothetical, extracted or from a predecessor firm) and get the SEC Marketing Rule checklist for that one piece: each condition Rule 206(4)-1 attaches, with its paragraph, and the Rule 204-2 records to keep. Print it or copy it as a plain-text review record for the file.
Ad review checklist: the tool
Ad review checklistadviserdeck.com
Pre-filled with an example: a website page showing a composite’s gross and net returns, one unpaid client testimonial and one third-party ranking. Change any field; the checklist follows.
The advertisement
What the advertisement contains
Tick everything in the piece. The checklist below changes as you go.
Conditions this advertisement must meet
22 items
17 CFR 275.206(4)-1; 17 CFR 275.204-2
Contains: testimonial (unpaid), third-party rating, portfolio or composite results, gross performance.
The review checklist
Tick an item once the ad meets it. The paragraph of Rule 206(4)-1 sits under each one.
Is it an advertisement?
Every advertisement: the general prohibitions
Testimonial
The firm makes these disclosures, or reasonably believes the person giving the statement makes them, when it is disseminated. 206(4)-1(b)(1). Unpaid, or de minimis (a total of $1,000 or less in the preceding 12 months): the written agreement and the disqualification check do not apply. 206(4)-1(b)(4)(i), (e)(2).
Third-party rating
The firm discloses these, or reasonably believes the rating itself discloses them. 206(4)-1(c)(2).
Any performance
Gross performance
Portfolio or composite results: the prescribed periods
Records to keep under Rule 204-2
- A copy of the advertisement as disseminated. For an oral advertisement, a copy of any written or recorded materials used instead.Rule 204-2(a)(11)(i)(A). Keep: Five years from the end of the fiscal year in which the ad was last disseminated, the first two in an appropriate office of the firm. (204-2(e)(3)(i))
- A copy of any questionnaire or survey used to prepare the rating, if the firm obtains one.Rule 204-2(a)(11)(ii). Keep: Five years from the end of the fiscal year in which the ad was last disseminated, the first two in an appropriate office of the firm. (204-2(e)(3)(i))
- The accounts, books, internal working papers and other records needed to form the basis for or demonstrate the calculation of the performance shown.Rule 204-2(a)(16). Keep: Five years from the end of the fiscal year in which the ad was last disseminated, the first two in an appropriate office of the firm. (204-2(e)(3)(i))
- If they are not in the ad itself, a record of the disclosures on compensation and conflicts given under 206(4)-1(b)(1)(ii) and (iii).Rule 204-2(a)(15)(i). Keep: Five years from the end of the fiscal year in which the last entry was made, the first two in an appropriate office of the firm. (204-2(e)(1))
- Documentation of the firm’s reasonable basis for believing that the testimonial or endorsement complies with the rule, and that the rating’s survey meets 206(4)-1(c)(1).Rule 204-2(a)(15)(ii). Keep: Five years from the end of the fiscal year in which the last entry was made, the first two in an appropriate office of the firm. (204-2(e)(1))
Sign-off
Changes asked for, where the support for each fact is filed, who approved.
Rule 206(4)-1 at a glanceCard 01
- General prohibitions on every advertisement717 CFR 275.206(4)-1(a)(1)-(7)
- Conditions on a testimonial or endorsement317 CFR 275.206(4)-1(b)(1)-(3)
- De minimis pay: $1,000 or less over the preceding 12 months skips the agreement and disqualification check17 CFR 275.206(4)-1(b)(4)(i), (e)(2)
- Net performance beside any gross figure, at least equal prominence17 CFR 275.206(4)-1(d)(1)
- Periods, in years, for portfolio or composite results1, 5, 1017 CFR 275.206(4)-1(d)(2)
- Conditions on predecessor performance417 CFR 275.206(4)-1(d)(7)
- Ads and performance backup kept, from the year last disseminated5 years17 CFR 275.204-2(e)(3)(i)
- Of which in an appropriate office of the adviserfirst 217 CFR 275.204-2(e)(3)(i)
What the checklist covers
One advertisement at a time. You tick what the piece contains, and the tool lays out the conditions Rule 206(4)-1 attaches to each of those things, with the paragraph to cite, then the Rule 204-2 records the firm keeps for it. The general prohibitions are always on the list, because they bind every advertisement whatever it contains. The background on each part of the rule is in the guide to the SEC Marketing Rule.
- Every advertisement: no untrue or unsubstantiated facts, fair and balanced treatment of benefits and risks17 CFR 275.206(4)-1(a)(1)-(7)
- Testimonials, endorsements and third-party ratings: disclosures, a reasonable basis and, when paid, an agreement17 CFR 275.206(4)-1(b), (c)
- Performance: net beside gross, the one-, five- and ten-year periods, and the special types17 CFR 275.206(4)-1(d)
- Records: the ad, the support for the performance, the testimonial and rating files17 CFR 275.204-2(a)(11), (a)(15), (a)(16), (a)(19)
The rule binds advisers “registered or required to be registered” with the SEC. A state-registered adviser follows its state’s advertising rules, which this tool does not read. A broker-dealer’s retail communications fall under FINRA Rule 2210 instead, where “an appropriately qualified registered principal of the member must approve each retail communication” before the earlier of its use or its filing with FINRA. A firm with a steady flow of pieces to review may run this work in software; the advertising review software comparison reads the products built for it.
Hypothetical performance carries a condition that lives in the firm’s procedures, not in the ad: written policies and procedures that keep it relevant to the intended audience. Those sit with the written policies your Rule 206(4)-7 program already requires, and the compliance manual template is a place to draft them.
Worked example: a composite page on the firm’s website
The tool opens on a common case. A firm’s website page shows its Core Equity composite, gross and net of fees, with a line from a current client (unpaid) and a ranking from a publication the firm did not pay. The page offers the firm’s services to anyone who reads it, so it is an advertisement. Counted against the rule, it carries 22 checklist items and five records.
One web page, read paragraph by paragraph
| What the page contains | Items | Rule 206(4)-1 | Rule 204-2 records |
|---|---|---|---|
| The page itself | 6 | (e)(1)(i); (a)(1)-(4), (a)(7) | (a)(11)(i)(A) |
| One unpaid client testimonial | 5 | (e)(17); (b)(1)(i)(A), (C); (b)(1)(iii); (b)(2)(i) | (a)(15)(i), (a)(15)(ii) |
| A third-party ranking, not paid for | 4 | (e)(18); (c)(1); (c)(2)(i)-(ii) | (a)(11)(ii), (a)(15)(ii) |
| Composite returns, gross and net | 7 | (a)(6); (d)(1)(i)-(ii); (d)(2); (d)(3); (e)(10)(ii) | (a)(16) |
| Total | 22 | 5 records |
17 CFR 275.206(4)-1; 17 CFR 275.204-2(a)
Now pay the client. A gift card well under the $1,000 de minimis line adds three items: the testimonial becomes an advertisement in its own right under (e)(1)(ii), and the page must say compensation was given and describe its terms. Pay more than de minimis and two more arrive, the written agreement and the disqualification check, for 27 in all. Paying is what brings the paperwork, more than the testimonial itself.
Which testimonial and endorsement conditions apply
| Condition | Unpaid | De minimis | Paid more | Firm’s own people |
|---|---|---|---|---|
| Who gave it, and conflicts (b)(1)(i)(A), (C), (iii) | Applies | Applies | Applies | Not required |
| Pay disclosed and its terms (b)(1)(i)(B), (ii) | No pay to disclose | Applies | Applies | Not required |
| Reasonable basis (b)(2)(i) | Applies | Applies | Applies | Applies |
| Written agreement (b)(2)(ii) | Not required | Not required | Applies | Not required |
| Disqualification check (b)(3) | Not required | Not required | Applies | Applies if paid more |
17 CFR 275.206(4)-1(b)(1)-(4), (e)(2)
The last column is the (b)(4)(ii) exemption for the firm’s partners, officers, directors, employees and affiliates. It holds only while the affiliation is “readily apparent to or is disclosed to” the reader and the firm documents the person’s status, and Rule 204-2(a)(15)(iii) asks for a record of their names. Once an ad is approved, the retention calculator gives the keep-until date for its file.
The rule text
The checklist rests on three sentences: what the rule forbids, the gate on testimonials, and how long the file is kept.
The first sentence is why the review happens before an ad goes out: the violation is in disseminating it. The third is why an evergreen web page keeps its file open, since the five years run from the year it was last disseminated. The Rule 204-2 guide covers the rest of the adviser’s books, and the social media archiving comparison covers keeping copies of posts that count as advertisements.
Where the rule says so
Every item the tool can produce, grouped by paragraph, with the rule’s own words. Open a row to read them. The full text is on the eCFR: Rule 206(4)-1 and Rule 204-2.
Paragraph (a): the general prohibitions
No untrue statement of a material fact, and nothing left out that makes what is said misleading.
“Include any untrue statement of a material fact”
17 CFR 275.206(4)-1(a)(1)
Every material statement of fact is one the firm has a reasonable basis to believe it can substantiate if the SEC asks.
“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”
17 CFR 275.206(4)-1(a)(2)
Nothing in it is likely to lead a reader to an untrue or misleading inference about a material fact about the firm.
“reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact”
17 CFR 275.206(4)-1(a)(3)
Each potential benefit it mentions comes with fair and balanced treatment of the material risks or limitations.
“without providing fair and balanced treatment of any material risks or material limitations associated with the potential benefits”
17 CFR 275.206(4)-1(a)(4)
It is not otherwise materially misleading.
“Otherwise be materially misleading”
17 CFR 275.206(4)-1(a)(7)
Any reference to specific investment advice the firm gave is presented in a fair and balanced way.
“Include a reference to specific investment advice provided by the investment adviser where such investment advice is not presented in a manner that is fair and balanced”
17 CFR 275.206(4)-1(a)(5)
Results and time periods are put in or left out in a fair and balanced way.
“Include or exclude performance results, or present performance time periods, in a manner that is not fair and balanced”
17 CFR 275.206(4)-1(a)(6)
Paragraph (b): testimonials and endorsements
Each statement is labelled correctly: a testimonial comes from a current client or private fund investor, an endorsement from anyone else.
“Testimonial means any statement by a current client or investor in a private fund advised by the investment adviser”
17 CFR 275.206(4)-1(e)(17), (e)(5)
It says clearly and prominently that the testimonial was given by a current client or investor, or the endorsement by someone who is not one.
“That the testimonial was given by a current client or investor, and the endorsement was given by a person other than a current client or investor, as applicable”
17 CFR 275.206(4)-1(b)(1)(i)(A)
It says clearly and prominently that cash or non-cash compensation was provided.
“That cash or non-cash compensation was provided for the testimonial or endorsement, if applicable”
17 CFR 275.206(4)-1(b)(1)(i)(B)
It gives, clearly and prominently, a brief statement of any material conflicts of interest the person has from the relationship with the firm.
“A brief statement of any material conflicts of interest on the part of the person giving the testimonial or endorsement”
17 CFR 275.206(4)-1(b)(1)(i)(C)
The material terms of the compensation arrangement are disclosed, with a description of what was or will be paid.
“The material terms of any compensation arrangement, including a description of the compensation provided or to be provided”
17 CFR 275.206(4)-1(b)(1)(ii)
A description of the person’s material conflicts of interest, from the relationship or the pay, is disclosed.
“A description of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the investment adviser’s relationship with such person and/or any compensation arrangement”
17 CFR 275.206(4)-1(b)(1)(iii)
The firm has a reasonable basis for believing the testimonial or endorsement complies with the rule.
“A reasonable basis for believing that the testimonial or endorsement complies with the requirements of this section”
17 CFR 275.206(4)-1(b)(2)(i)
A written agreement with the person describes the scope of the agreed activities and the terms of compensation.
“A written agreement with any person giving a testimonial or endorsement that describes the scope of the agreed-upon activities and the terms of compensation for those activities”
17 CFR 275.206(4)-1(b)(2)(ii)
The firm has checked that the person is not an ineligible person (a disqualifying SEC action, or a disqualifying event within the past ten years) when the statement is disseminated.
“the person giving the testimonial or endorsement is an ineligible person at the time the testimonial or endorsement is disseminated”
17 CFR 275.206(4)-1(b)(3), (e)(4), (e)(9)
The person’s affiliation with the firm is readily apparent or disclosed when the statement is disseminated, and the firm documents the person’s status at that time.
“the affiliation between the investment adviser and such person is readily apparent to or is disclosed to the client or investor at the time the testimonial or endorsement is disseminated”
17 CFR 275.206(4)-1(b)(4)(ii)
Paragraph (c): third-party ratings
The rating comes from a person that is not a related person and that gives ratings or rankings in the ordinary course of its business.
“a rating or ranking of an investment adviser provided by a person who is not a related person”
17 CFR 275.206(4)-1(e)(18)
The firm has a reasonable basis for believing any questionnaire or survey behind the rating makes favorable and unfavorable answers equally easy and was not designed to produce a set result.
“structured to make it equally easy for a participant to provide favorable and unfavorable responses”
17 CFR 275.206(4)-1(c)(1)
The date the rating was given and the period it was based on are disclosed clearly and prominently.
“The date on which the rating was given and the period of time upon which the rating was based”
17 CFR 275.206(4)-1(c)(2)(i)
The identity of the third party that created and tabulated the rating is disclosed clearly and prominently.
“The identity of the third party that created and tabulated the rating”
17 CFR 275.206(4)-1(c)(2)(ii)
It discloses clearly and prominently that the firm paid, directly or indirectly, to obtain or use the rating.
“that compensation has been provided directly or indirectly by the adviser in connection with obtaining or using the third-party rating”
17 CFR 275.206(4)-1(c)(2)(iii)
Paragraph (d): performance
Nothing says or implies that the SEC approved or reviewed how the performance was calculated or presented.
“Any statement, express or implied, that the calculation or presentation of performance results in the advertisement has been approved or reviewed by the Commission”
17 CFR 275.206(4)-1(d)(3)
Net performance appears with the gross, with at least equal prominence and in a format designed to make the two easy to compare.
“With at least equal prominence to, and in a format designed to facilitate comparison with, the gross performance”
17 CFR 275.206(4)-1(d)(1)(i)
Net is calculated over the same period, with the same type of return and methodology, as the gross.
“Calculated over the same time period, and using the same type of return and methodology, as the gross performance”
17 CFR 275.206(4)-1(d)(1)(ii)
If net uses a model fee, the model fee gives figures no higher than the actual fee would, or equals the highest fee charged to the intended audience.
“The deduction of a model fee that is equal to the highest fee charged to the intended audience to whom the advertisement is disseminated”
17 CFR 275.206(4)-1(e)(10)(ii)
Results for one-, five- and ten-year periods are shown with equal prominence, each ending no earlier than the most recent calendar year-end.
“for one-, five-, and ten-year periods, each presented with equal prominence and ending on a date that is no less recent than the most recent calendar year-end”
17 CFR 275.206(4)-1(d)(2)
Where the portfolio did not exist for one of those periods, the life of the portfolio is shown in its place.
“the life of the portfolio must be substituted for that period”
17 CFR 275.206(4)-1(d)(2)
All related portfolios (those with substantially similar policies, objectives and strategies) are included.
“Any related performance, unless it includes all related portfolios”
17 CFR 275.206(4)-1(d)(4), (e)(15)
If any are left out, the results are not materially higher than with all of them, and the one-, five- and ten-year periods do not change.
“The advertised performance results are not materially higher than if all related portfolios had been included”
17 CFR 275.206(4)-1(d)(4)(i)-(ii)
The ad provides, or offers to provide promptly, the results of the total portfolio the subset was extracted from.
“the performance results of the total portfolio from which the performance was extracted”
17 CFR 275.206(4)-1(d)(5)
Policies and procedures the firm has adopted and implemented are reasonably designed to make the hypothetical performance relevant to the likely financial situation and investment objectives of the intended audience.
“relevant to the likely financial situation and investment objectives of the intended audience of the advertisement”
17 CFR 275.206(4)-1(d)(6)(i)
The ad gives that audience enough information to understand the criteria used and the assumptions made.
“sufficient information to enable the intended audience to understand the criteria used and assumptions made”
17 CFR 275.206(4)-1(d)(6)(ii)
It gives enough information to understand the risks and limitations of using hypothetical performance in investment decisions (for private fund investors, an offer to provide it promptly is enough).
“sufficient information to enable the intended audience to understand the risks and limitations of using such hypothetical performance in making investment decisions”
17 CFR 275.206(4)-1(d)(6)(iii)
The people primarily responsible for the prior results manage accounts at this firm.
“The person or persons who were primarily responsible for achieving the prior performance results manage accounts at the advertising adviser”
17 CFR 275.206(4)-1(d)(7)(i)
The accounts at the prior firm are similar enough to the accounts managed here that the results give relevant information.
“sufficiently similar to the accounts managed at the advertising investment adviser that the performance results would provide relevant information”
17 CFR 275.206(4)-1(d)(7)(ii)
All accounts managed in a substantially similar way are included, or leaving one out does not give materially higher results or change the one-, five- and ten-year periods.
“All accounts that were managed in a substantially similar manner are advertised”
17 CFR 275.206(4)-1(d)(7)(iii)
The ad clearly and prominently includes all relevant disclosures, including that the results came from accounts managed at another entity.
“including that the performance results were from accounts managed at another entity”
17 CFR 275.206(4)-1(d)(7)(iv)
Paragraph (e): when it is an advertisement
The piece is an advertisement: it goes to more than one person (or to even one person if it shows hypothetical performance), it offers the firm’s advisory services (to prospective clients, or new services to current clients), and it is not an extemporaneous, live, oral communication.
“Any direct or indirect communication an investment adviser makes to more than one person, or to one or more persons if the communication includes hypothetical performance”
17 CFR 275.206(4)-1(e)(1)(i)
The paid testimonial or endorsement is treated as an advertisement in its own right, so the whole rule applies to it.
“Any endorsement or testimonial for which an investment adviser provides compensation, directly or indirectly”
17 CFR 275.206(4)-1(e)(1)(ii)
Two exemptions are left out of the tool because they turn on facts about the person, not the ad. A testimonial or endorsement by a registered broker-dealer skips some or all of (b)(1) and (b)(3) depending on Regulation Best Interest, whether the reader is a retail customer, and the broker-dealer’s own disqualification status (206(4)-1(b)(4)(iii)). A person covered by Rule 506(d) of Regulation D for a Rule 506 offering, whose involvement would not disqualify it, skips the (b)(3) check (206(4)-1(b)(4)(iv)).
Also outside the tool: an interactive analysis tool that clients or prospective clients run themselves is not hypothetical performance if the firm describes its criteria, method, limitations and key assumptions, explains that results may vary, describes the universe of investments it considers where that applies, and discloses that the outcomes are hypothetical (206(4)-1(e)(8)(ii)(A)). The records rows come from Rule 204-2: a copy of each “Advertisement (as defined in § 275.206(4)-1(e)(1) of this chapter) that the investment adviser disseminates, directly or indirectly” under (a)(11), the performance backup “necessary to form the basis for or demonstrate the calculation of any performance or rate of return” under (a)(16), and the testimonial and rating files under (a)(15). The SEC Marketing Rule guide walks through each paragraph in order.