SEC marketing rule & online reviews: how RIAs can ensure compliance

SEC marketing rule & online reviews: how RIAs can ensure compliance
The SEC marketing rule opens the door for RIAs to leverage online reviews to attract clients
The SEC marketing rule allows RIAs to take advantage of online reviews to promote their services. Here's what you need to know about the compliance requirements
DEC 01, 2024

Most consumers rely on online reviews when making purchasing decisions – and for good reason. Online ratings and reviews are free and easily accessible. They can also give other customers an idea of the value, quality, and reliability of a product or service.   

A recent survey, however, revealed that only a fraction of financial advisers leverages customer reviews to promote their services. This is even after the Securities and Exchange Commission (SEC) updated its marketing rules to allow the use of testimonials and endorsements in advertising. A huge part of this reluctance can be attributed to the stringent compliance requirements the commission has laid down. 

In this article, we will shed light on the modernized version of the SEC marketing rule, focusing on online reviews. We will discuss key terms and rules on compliance, including required disclosures and prohibitions. We also asked an industry expert to share her insights into the crucial role online reviews play in attracting clients.  

If you’re still on the fence about using testimonials and endorsements in your marketing campaign due to strict requirements and restrictions, this article can serve as a guide. Read on and find out how to make the new SEC marketing rule work for you. 

Why online reviews are important for RIAs 


In today’s digital world, online reviews have become a powerful tool for brands to increase visibility and build a good reputation. Most consumers scour the internet for reviews to give them some form of reassurance that they’re making the right purchasing decision; this includes when searching for a financial adviser. 

A recent consumer behavior survey has found that 42% of customers begin their search for a financial adviser through search engines like Google. The figure is higher than those who ask family and friends for a referral at 32%. The poll results highlight the importance of online reviews for industry professionals, including RIAs. 

“I don’t know about you, but I will not even buy a pair of jeans without reading reviews online, let alone spend money on bigger ticket items like home renovation projects, or travel,” said Samatha Russell, chief evangelist at FMG Suite.  

“Consumers are 100% used to reading reviews now for every single purchase they make. Do you think someone will hand over their entire life savings without first vetting you?” 

Previous SEC marketing rules have prevented RIAs from taking advantage of online reviews to promote their services. The situation, however, has changed with the implementation of a modernized version of the ruling.  

“For a long time, advisers as a rule didn’t have any reviews, so you could get away with not having them,” Russell added. “But now that some advisers do have them… the consumer will expect all advisers to have them. 

“Imagine someone googles you… and they can’t find a single review… then they start googling other advisers they were referred to as well, and other firms do have reviews. Think about how that looks to the consumer.” 

She also stressed the importance of online reviews in helping RIAs rank higher in Google searches in a process called search engine optimization (SEO).  

“Google reviews are one of the top factors in how high your firm will rank,” she noted. Here’s Russell explaining how financial advisers can get more Google Reviews.     

What are the key changes under the SEC marketing rules? 


By the end of 2020, the SEC finalized reforms under the Investment Advisers Act. The goal was to modernize the rules that govern investment adviser’s marketing communications. The change effectively created a single rule – the SEC marketing rule 206(4)-1 or simply Rule 206(4)-1 – that replaced advertising and cash solicitation rulings at that time.  

The new marketing rule came into effect on May 4, 2021, but provided an 18-month transition period. The final compliance date was on November 4, 2022. 

In a nutshell, the updated rule allows financial advisers to use testimonials, endorsements, and ratings on different third-party review sites for marketing purposes. This opened the door for RIAs to take advantage of the power of online reviews as long as they adhered to certain requirements.  

We’ll highlight some of the key changes implemented under the SEC marketing rule below:  

Testimonial vs. endorsement 


Despite barring advisers from using testimonials for decades, the SEC has never actually provided a statutory definition of the term – that’s until the new rule was finalized. Here’s a verbatim definition of a testimonial under the updated rule: 

A testimonial means any statement by a current client or investor in a private fund advised by the investment adviser: 

  • about the client or investor’s experience with the investment adviser or its supervised persons 

  • that directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser 

An endorsement, on the other hand, is “any statement by a person other than a current client or investor in a private fund advised by the investment adviser” that: 

  • indicates approval, support, or recommendation of the investment adviser or its supervised persons or describes that person’s experience with the investment adviser or its supervised persons 

  • directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser 

  • refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser 

The SEC marketing rule also provides a definition of a third-party rating, which is a “rating or ranking of an investment adviser provided by a person who is not a related person, and such person provides such ratings or rankings in the ordinary course of its business.” 

In summary, a testimonial is an online review made by a client, while an endorsement is made by non-clients. Along with third-party ratings, testimonials and endorsements can serve as “evergreen” referrals as long as their use in advertisements meets the SEC’s compliance requirements.  

What is an advertisement? 

The new SEC marketing rule defines an advertisement as either:  

  • any direct or indirect communication an investment adviser makes to more than one person… that offers the investment adviser’s investment advisory services… 

  • any endorsement or testimonial for which an investment adviser provides compensation, directly or indirectly… 

An advertisement also excludes: 

  • extemporaneous, live, oral communications, regardless of whether they are broadcast 

  • any information contained in a statutory or regulatory notice, filing, or other required communication… 

  • a communication that includes hypothetical performance that is provided, either:  

  • in response to an unsolicited investor request 

  • to a private fund investor in a one-on-one communication 

The SEC’s new advertising rules indicate that advertisements can contain testimonials as long as certain requirements are met. While not all testimonials are considered advertisements, if compensation is involved the resulting testimonials will be considered as advertisements, which are subject to compliance.  

Apart from the definitions above, there is another set of terms that RIAs must understand that relates to online reviews. These are entanglement and adoption. Here’s a brief overview of both terms: 

Find out why the SEC marketing rule is difficult to navigate, according to some financial advisers.  

What are the seven prohibitions of the SEC marketing rule? 


While the new SEC advertising rule permits the use of testimonials, endorsements, and third-party ratings, there are certain restrictions that RIAs must be aware of. These are the seven general prohibitions of the SEC marketing rule, taken verbatim from the 430-page final ruling:  

In any advertisement, an adviser may not: 

  1. include any untrue statement of a material fact, or omit to state a material fact necessary in order to make the statement made, in the light of the circumstances under which it was made, not misleading  

  1. 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 

  1. include information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the investment adviser 

  1. discuss any potential benefits to clients or investors connected with or resulting from the investment adviser’s services or methods of operation without providing fair and balanced treatment of any material risks or material limitations associated with the potential benefits 

  1. 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 

  1. include or exclude performance results, or present performance time periods, in a manner that is not fair and balanced 

  1. otherwise be materially misleading 

 

According to the new marketing rule, these seven general prohibitions were set to prevent advisers from committing “fraudulent, deceptive, or manipulative acts.” 

How do you ensure that video testimonials comply with the SEC marketing rule? The experts weigh in in this article.  

How can RIAs ensure compliance with SEC marketing rules? 


The SEC marketing rule lays down three conditions that apply to testimonials and endorsements. These are categorized into: 

  1. required disclosures 

  1. adviser oversight and compliance obligations 

  1. promoter disqualifications 

Let’s go over each of these categories. 

Required disclosures 


There are five disclosures that RIAs are required to make to ensure compliance with the SEC marketing rule. If they are using a promoter, they must “reasonably believe” that the person behind the testimonial or endorsement makes all five disclosures. The disclosures must be made once the testimonial or endorsement has been circulated.   

According to the new rule, the first three disclosures must be made “clearly and prominently.” This means that they must be “at least as prominent as the testimonial or endorsement.” 

These are the five required disclosures under the updated SEC rule: 

  • the testimonial was given by a current client (or private fund investor), or that the endorsement was given by a person other than a current client 

  • cash or non-cash compensation was provided for the testimonial or endorsement 

  • a brief statement of any material conflicts of interest on the part of the promoter resulting from the adviser’s relationship with such promoter 

  • the material terms of any compensation arrangement, including a description of the compensation provided… directly or indirectly, to the promoter for the testimonial or endorsement 

  • a description of any material conflicts of interest on the part of the promoter resulting from the adviser’s relationship with such promoter and/or any compensation arrangement 

RIAs are also required to keep records proving that the disclosures were provided appropriately and in a timely manner. 

2. Adviser oversight and compliance 

Regardless of whether the testimonial or endorsement is compensated or uncompensated, the SEC’s new ruling requires RIAs to have:  

  • a reasonable basis for believing that any testimonial or endorsement complies with the requirements of the rule 

  • a written agreement with any [non-affiliated promoter] that describes the scope of the agreed-upon activities and the terms of the compensation for those activities, if the promoter is to be paid more than de minimis compensation 

3. Promoter disqualification 

The SEC marketing rule prohibits certain individuals from acting as compensated promoters. These promoters are considered “ineligible persons” because they are subject to either: 

  • a discualifying Commission action: an SEC order barring or suspending a person from acting in any capacity under the Federal securities laws 

  • a disqualifying event: certain felony or misdemeanor convictions; SEC, CFTC, or SRO final orders; court-issued orders, judgments or decrees; and SEC cease-and-desist orders 

Ineligible persons are also subject to a ten-year lookback period and carve-outs for certain affiliates and broker-dealers. 

This SEC marketing rule checklist can help you maintain compliance with the requirements related to the new ruling’s amendments.  

Navigating the SEC marketing rule 

The new SEC marketing rule gives RIAs the opportunity to boost their online reputation through customer reviews. The key is taking a proactive approach to both getting reviews and meeting compliance requirements. While the stringent rules and prohibitions may be a bit overwhelming for some investment advisers, there’s help available.  

“I know many advisers are still hesitant to embrace actively getting and using testimonials and Google reviews in their marketing, since it feels like the rule is still a bit grey in certain areas, and no one wants to be the guinea pig being fined,” Russell said. 

“However, there are many attorneys who have studied this extensively that specifically work with RIAs that advisers can hire to help them ensure they are being compliant and following the rule. And I would highly suggest advisory firms do just that.” 

Visit and bookmark our goRIA section for more updates on the SEC marketing rule, so you remain compliant. 

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