SEC Marketing Rule — Advertising and Testimonials for Investment Advisers

Exam: CFP — Certified Financial Planner Chapter: Ch01 — Professional Conduct and Regulation Rule: Investment Adviser Marketing Rule (Release No. IA-5653) Effective Date: November 4, 2022 (full compliance required) Replaces: Old advertising rule (Rule 206(4)-1) and solicitation rule (Rule 206(4)-3) Last Updated: 2026-06-26

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Key Takeaways

• The SEC's new Marketing Rule (effective November 4, 2022) replaced the decades-old advertising ban on testimonials and endorsements for registered investment advisers (RIAs).
• Testimonials and endorsements are now permitted — with required disclosures.
• Third-party ratings (e.g., "Best Financial Advisers" lists) are permitted with conditions.
• Hypothetical performance advertising is permitted but subject to strict rules.
• The rule consolidated two old rules (advertising + solicitation) into one.
• CFP practitioners who are also registered as RIAs must comply with this rule in their marketing.

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Background: Why This Matters

The old SEC advertising rule (in place since 1961) prohibited registered investment advisers from using:

• Testimonials from clients
• Endorsements from third parties
• Past specific recommendations

This rule was considered outdated in the social media era, where reviews and testimonials are standard. The new Marketing Rule replaces it with a principles-based framework allowing these practices with appropriate safeguards.

CFP Exam Tip: Any content stating that "RIAs are prohibited from using client testimonials" is outdated. As of November 2022, testimonials and endorsements are permitted with proper disclosures.

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What the New Marketing Rule Allows (With Conditions)

Testimonials (from current clients)

Permitted — a current client may speak positively about their experience with the adviser, subject to:

1. Clear and prominent disclosure that the person is a current client 2. Disclosure of any compensation paid for the testimonial (cash or non-cash) 3. Disclosure of any material conflicts of interest 4. Adviser must have a reasonable basis that the testimonial is not misleading

Example: A CFP posts a video of a client saying "My adviser helped me retire 3 years early." This is now permitted with proper disclosures (client relationship disclosed, compensation if any disclosed, not misleading).

Endorsements (from non-clients)

Permitted — a non-client (celebrity, influencer, professional) may endorse the adviser, subject to the same three disclosures above plus a written agreement if compensation exceeds $1,000 in the prior 12 months.

Disqualified endorsers: Convicted criminals or individuals with certain regulatory sanctions cannot provide endorsements used by the adviser.

Third-Party Ratings

Permitted — advisers may display third-party ratings (e.g., "Five Stars on XYZ," "Best-Of" lists) if:

1. The adviser did not know or have reason to know that the rating was created in a way that would be misleading 2. Clear disclosure of the date, period covered, and the criteria used 3. If the adviser paid to be considered for the rating, that must be disclosed

CFP Exam Tip: Just displaying a third-party rating without any payment is generally permitted as long as it's not misleading. Paid "ratings" or awards where you must pay to be considered require disclosure.

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Performance Advertising Requirements

The Marketing Rule imposes new requirements for advertising performance:

Net vs. Gross Performance

• Advisers may show gross performance (before fees) only if they also show net performance (after fees) with equal prominence
• Net performance figures must use the same time period and type of return as gross

Time Periods

• Must show performance for 1, 5, and 10-year periods (or since inception if shorter)
• Presented with equal prominence

Hypothetical Performance

Permitted — but subject to the strictest requirements:

1. Must have policies and procedures to ensure the hypothetical performance is relevant to likely investors 2. Must include required disclosures about the hypothetical nature 3. Mass advertising of hypothetical performance to retail investors is effectively prohibited without the policies and procedures framework

Exam Tip: This is a common trap. Hypothetical (back-tested) performance can be shown, but not to retail investors in mass media without rigorous controls and disclosures.

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The Seven Prohibited Practices (General Prohibitions)

The Marketing Rule's general prohibitions apply to all adviser advertising:

1. Untrue statements of material fact 2. Misleading omissions — omitting facts necessary to make other statements not misleading 3. Untrue or misleading implications about inference from facts stated 4. Unsubstantiated material claims — statements the adviser cannot substantiate 5. Misleading performance claims — misrepresenting past recommendations, results, or services 6. Cherry-picked results — presenting only favorable performance without proper context 7. Third-party testimonials or ratings used in a misleading manner

CFP Exam Tip: The seven general prohibitions are principles-based — they focus on whether advertising is misleading, not a specific mechanical checklist. Questions may present a scenario and ask whether an advertisement violates one of these principles.

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Scope: What Counts as an "Advertisement"

The Marketing Rule defines "advertisement" broadly to include:

• Any direct or indirect communication an adviser makes to more than one person (or to one person if the content is substantially the same as communications to others)
• Any communication that offers the adviser's investment advisory services

Key Exclusion: 1-on-1 Communications

Extemporaneous, live oral communications that are made to a single person (1-on-1) are excluded from the Marketing Rule's definition of advertisement. This means:

• A verbal conversation or live presentation to a single prospective client is not subject to the Marketing Rule
• However, prepared scripts, pre-recorded videos, or written materials sent 1-on-1 may still qualify as advertisements

CFP Exam Tip: The 1-on-1 exclusion is a commonly tested boundary. If an adviser sends the same written material to 10 prospects individually (not simultaneously), it can still be an advertisement — the rule is about the nature and reach of the content, not just the delivery method.

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Record Retention Requirements

The Marketing Rule imposes specific recordkeeping obligations:

• Retention period: Advisers must retain copies of all advertisements — and related materials — for 5 years from the date of the advertisement's last use
• First 2 years: Copies must be kept in an easily accessible place
• What must be retained: The advertisement itself; any documentation substantiating material claims; written agreements with promoters; records of hypothetical performance policies and procedures

CFP Exam Tip: The 5-year retention period is directly testable. Note the extra "easily accessible" requirement for the first 2 of the 5 years.

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CFP Board Rules vs. SEC Marketing Rule

CFP practitioners should understand that CFP Board's own advertising standards and the SEC Marketing Rule are distinct:

| Feature | CFP Board Standards | SEC Marketing Rule | |---|---|---| | Who it applies to | CFP certificants | SEC-registered investment advisers | | Source | CFP Board Code of Ethics | Securities Act / SEC | | Testimonials | Subject to CFP Board guidance | Now permitted with disclosures | | Enforcement | CFP Board disciplinary process | SEC examination and enforcement |

A CFP certificant who is also an SEC-registered RIA must comply with both sets of standards.

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DOL Fiduciary Rule — Current Status (Not the SEC Marketing Rule, but Related)

Important clarification for CFP exam candidates:

The DOL attempted to expand the fiduciary standard for retirement advice in 2024, but the Fifth Circuit Court vacated the 2024 DOL fiduciary rule expansion in July 2024.

Current applicable framework:

• 2016 DOL fiduciary rule: Still in effect for ERISA plan assets (traditional retirement accounts covered by ERISA)
• PTE 2020-02: Prohibited Transaction Exemption allowing non-ERISA financial professionals to provide retirement advice while receiving compensation, subject to conditions (impartial conduct standards, disclosures, policies)

CFP Exam Tip: Do NOT describe the 2024 DOL expansion as current law — it was struck down. The current standard is the 2016 framework + PTE 2020-02. This is distinct from the CFP Board's own fiduciary duty (which applies to ALL financial planning services, not just retirement accounts).

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Summary: What Changed with the Marketing Rule

| Feature | Old Rule (Pre-November 2022) | New Marketing Rule | |---|---|---| | Testimonials from clients | Prohibited | Permitted with disclosures | | Endorsements from non-clients | Prohibited | Permitted with disclosures | | Third-party ratings | Restricted | Permitted with conditions | | Hypothetical performance | Effectively prohibited | Permitted with strict conditions | | Net vs. gross performance | Less structured | Specific equal-prominence rules | | Solicitation rule | Separate rule | Consolidated into Marketing Rule |

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Tags: #CFP #Ch01 #ProfessionalConduct #SECMarketingRule #Testimonials #Endorsements #RIA #Advertising #HypotheticalPerformance #DOLFiduciary #PTE202002