Advertising & the Marketing Rule
Testimonials allowed with disclosures; performance must be fair and balanced.
What is Advertising & the Marketing Rule?
The SEC Marketing Rule permits testimonials and endorsements with required disclosures (whether the person is a client, whether they were paid, and material conflicts) and oversight of paid promoters. Performance must be shown net of fees alongside gross, generally over 1-, 5-, and 10-year periods, and cannot be cherry-picked. Hypothetical performance is heavily restricted. NASAA updated its exams to reflect the rule in 2022; state-registered advisers follow their own state's advertising rules, which may differ.
Advertising & the Marketing Rule: a worked example
Showing only the three best-performing accounts as 'typical results' is misleading.
More terms in Ethics & Fiduciary Obligations
Form ADV Part 2 Brochure Delivery
Deliver 48 hours before the contract, or at signing with a 5-business-day exit.
Advisory Contract Requirements
Written, specific about fees, no assignment without consent, no waiver of rights.
Assignment of an Advisory Contract
Transferring a client contract requires the client's consent - including by change of control.
Performance-Based Fees & Qualified Clients
Allowed only for qualified clients: $1.4M with the adviser or $2.7M net worth (from June 29, 2026).
Prepaid Fees & Financial Requirements
Prepayment over $500, six months ahead, triggers net worth and balance sheet rules.
Custody
Holding, or having authority to obtain, client funds or securities.
Discretionary Authority
Deciding the asset, the amount, or buy versus sell - without asking first.
Third-Party Trading Authorization
Anyone other than the owner needs written authority to trade the account.