SEC Risk Alert: Marketing Rule Violations for Testimonials, Endorsements, and Third-Party Ratings

December 18, 2025

What happened?

On December 16, 2025, the SEC Division of Examinations published the first risk alert of 2025. The risk alert provides additional information on compliance with the Marketing Rule. Marketing deficiencies focused on third-party promotion in the form of testimonials, endorsements, and third-party ratings. SEC staff observations regarding compliance, especially on disclosure requirements and oversight, are valuable for any investment adviser whose marketing includes third-party promotion in any form.

I. Testimonials and Endorsements

SEC staff noted deficiencies for advertising disseminated to current and prospective clients and current and prospective investors in private funds that included testimonials (which are statements from current clients or current investors in private funds advised by the investment adviser) or endorsements (which are made by all other persons).  The observations fell into the following categories.

Clear and Prominent Disclosures – The most common deficiency for a testimonial or endorsement was failure to provide required disclosures at the time the testimonial or endorsement was disseminated.

• Not prominent – buried behind a hyperlink or presented in a smaller or lighter font.
• Unclear – testimonials or endorsements incorporated within narrative advertising were not called out as being from current or former clients.
• Undisclosed compensation – Advisers provided compensation in the form of gift cards to clients to write reviews on third-party websites without the reasonable basis that disclosures would be given by the client providing the testimonial on those websites.

Material Terms of Compensation – Undisclosed compensation arrangements, including compensation provided directly or indirectly to the promoters for the testimonials or endorsements.

• Generic disclosures – Disclosures with no mention of material information. The staff pointed out that page 96 of the adopting release addressed the need for specificity:
  • If a specific amount of cash compensation is paid, then disclose that amount.
  • If a percentage of the total advisory fee is paid, then disclose such percentage and the time period over which it is paid.
  • If non-cash compensation is paid and the value of the non-cash compensation is readily ascertainable, then disclose that amount.

Disclosure of the Material Conflicts – Staff observed failures to disclose material conflicts resulting from the advisers’ relationships with promoters and/or the compensation arrangements for the testimonials or endorsements in the advertisement.

• Failure to disclose promoter’s financial interest in adviser:
  • Promoters with financial interests in the adviser being promoted;
  • Client promoter who invested in the adviser; or
  • Promoters who were principals or officers with sub-advisory or other significant arrangements with the adviser being promoted.

Oversight and Compliance – The oversight and compliance provisions for testimonials and endorsements require advisers to have a reasonable basis for believing that the testimonials or endorsements complied with the requirements of the rule and written agreements with paid promoters. Staff observed noncompliance with these requirements:

• Inadequate oversight –Written policies and procedures, written agreements with promoters, and/or other documentation gave no evidence of reasonable belief of compliance.
• Lack of Written Agreements with Paid Promoters – Where promoter compensation exceeded $1,000 during a 12-month period, the required written agreement was not completed.

Ineligible Persons – Advisers violated the prohibition of compensating endorsements from ineligible or disqualified persons (such as those with disciplinary histories with state regulators) where the adviser knew or should have known.

Affiliated Promoters – While promoters affiliated with the adviser are exempt from disclosure and written agreement requirements, there are conditions for this exemption. The affiliation must be readily apparent or disclosed to the client or investor at the time the testimonial or endorsement is disseminated. Multiple failures to disclose or make the affiliated status readily apparent were noted by the staff.

II. Third-Party Ratings, Rankings, and Awards

The Marketing Rule prohibits the use of third-party ratings in advertisements, unless an adviser (1) has a reasonable basis for believing that any questionnaire or survey used in the preparation of the third-party ratings meets certain criteria, and (2) the adviser discloses certain information related to the rating. The SEC observed advisers using third-party ratings on websites, social media profiles or accounts, brochures and pitchbooks, press releases, newsletters, and blogs, among others, that did not meet both requirements:

Due Diligence – Advisers must have a method to demonstrate that third-party ratings are in compliance with the due diligence requirement: having a reasonable basis for believing that questionnaires or surveys used in the preparation of the third-party ratings were structured to make it equally easy for a participant to provide favorable and unfavorable responses and were not designed to produce any predetermined results.

• Choose a method of due diligence:
  • Review publicly disclosed information about the third party’s methodologies;
  • Obtain any questionnaires or surveys used in the preparation of the rating; and/or
  • Seek representations from the third-party rating agencies regarding general aspects of how the questionnaires or surveys were designed, structured, and administered.

Clear and Present Disclosures – Staff noted multiple deficiencies for noncompliant disclosures. A third-party rating must disclose in the place it is disseminated – (1) the time period covered, (2) the party that made the rating, and (3) whether compensation was paid to the third party. The SEC has issued civil penalties where those disclosures were not “clear and prominent” enough to meet the requirements of the Marketing Rule. In the risk alert, SEC staff noted:

• Links to third-party websites within RIA marketing – These violate the rule if neither the RIA’s site nor the third-party site contains clear and prominent disclosures.
• Failure to disclose the time period of the rating – The date on which the ratings were given and the period of time upon which the ratings were based must be clearly and prominently identified.
• Failure to identify the name of the rating party – Using logos that do not include the third party’s name and not otherwise clearly and prominently disclosing the name within the advertisement.
• Lack of compensation disclosures – Wholesale lack of disclosures or incomplete disclosures that failed to mention all sources of compensation to third parties.
  • Paying for use of logos or reprints of the rating, without disclosing this form of compensation.
  • Paying for upgraded or enhanced exposure in third-party advertising.
  • Paying for priority placement on third-party websites.
  • Payments for referrals from third-party websites or award recipient links from third-party websites.
  • Entry fees, subscription fees, or other fees paid to be considered for the rating but never disclosed.
• Placing disclosures at the bottom of the website pages away from the rating, using hyperlinks to disclosures, or otherwise not clearly and prominently displaying required disclosures.

What does this mean for me?

It is always nice to see the Division of Examinations publish an instructive Risk Alert. The alert reiterates what was already plain to see in last year’s sweep of Marketing Enforcement Actions, which is that advisers are making mistakes under the Marketing Rule.  Failing to clearly and prominently disclose required information is something we regularly see when our marketing team reviews advertising. Now we know it is a mistake the Division of Examinations is routinely discovering in exams, and a mistake the Division of Enforcements cites when penalizing firms.

Marketing Rule compliance may be a great New Year’s resolution. Make no mistake that the Atkins era, just like the Gensler era, will include examinations on this rule.  Inadequate policies and procedures, failing to implement procedures, failing to perform due diligence, and failing to provide clear and prominent disclosures are serious mistakes that can imperil your compliance program.

If you have questions or could use guidance to understand what this risk alert may mean for your firm’s compliance practices, let us know. We can provide a team of marketing reviewers and regulatory experts that can perfect your marketing rule compliance.