What is the SEC Marketing Rule?
The SEC Marketing Rule, formally Rule 206(4)-1 under the Investment Advisers Act of 1940, sets modern standards for how investment advisers promote their services. Introduced in 2020 and fully enforceable as of November 2022, the rule consolidates outdated advertising and solicitation guidelines into a single framework that accounts for today’s digital communications.
The rule aims to improve transparency, ensure fair presentation of performance data, and better protect investors in an increasingly digital and distributed advisory landscape.
What does the SEC Marketing Rule apply to?
The rule applies broadly to:
- SEC-registered investment advisers (RIAs): Including firms that manage private funds such as hedge funds, private equity funds, and CLOs
- Dual Registrants: Investment advisers who are also registered as broker-dealer representatives
- State-registered advisers: In jurisdictions that align with the SEC framework
- Marketing activity: Websites, social media, email, or third-party promotions whether direct or passive
- Endorsements and ratings: Any endorsement or third-party rating involving compensation or potential conflicts of interest
Key provisions
Expanded definition of “advertisement”
The rule expands what qualifies as an advertisement, covering:
- Any direct or indirect communication offering advisory services to more than one person
- Communications including compensated testimonials or endorsements — even if shared with a single recipient
Digital media, video, social platforms, and websites all fall within scope.
General prohibitions
All advertisements are subject to seven principles-based prohibitions. Ads must not:
- Include any untrue statement of a material fact
- Omit material facts necessary to avoid misleading the audience
- Include misleading implications or inferences
- Discuss potential benefits without fair and balanced treatment of associated risks
- Reference specific investment advice that is not presented in a fair and balanced manner
- Be materially misleading in any other way
Performance advertising standards
When promoting performance results, advisers must:
- Present net performance alongside gross performance with equal prominence
- Include returns for 1-, 5-, and 10-year periods, or since inception
- Comply with added requirements for hypothetical, extracted, or predecessor performance
Testimonials and endorsements
These are permitted with appropriate disclosures clearly and prominently, including:
- Whether the endorser is a client
- Compensation received
- Any material conflicts of interest
- Promoters receiving over $1,000 in a 12-month period must have a written agreement in place.
Third-party ratings
Third-party ratings must include clear, prominent disclosure of the methodology, time period, and any compensation involved.
Third-party ratings are permitted only if:
- The rating is from a neutral, independent party
- Disclosures are made about the methodology and reliability of the rating
- The adviser has a reasonable basis to believe the rating complies with the rule
Recordkeeping requirements
Advisers must:
- Retain advertisements and supporting records for at least five years
- Document performance data, testimonials, and any related compensation
- Maintain records even for materials distributed to just two individuals
Applicability to private funds and solicitation
Marketing materials for private funds (e.g., pitch decks, fact sheets, PPMs with performance) may be considered advertisements if they are:
- Promoting the adviser’s services
- Designed to attract investment into the fund
A flexible, technology-neutral approach
The rule is designed to accommodate evolving communication channels, including AI-generated content, digital ads, and influencer partnerships — so long as firms meet disclosure, recordkeeping, and oversight requirements.
Penalties and consequences for noncompliance
Failure to comply with the SEC Marketing Rule can lead to serious consequences, including:
- Enforcement actions and fines
- Cease and desist orders
- Public censure and suspension
- Reputational damage
- Increased audit scrutiny
- Legal exposure tied to misleading communications
Advisers may be held accountable for both intentional misconduct and inadvertent oversights, especially when proper documentation, disclosures, or supervisory processes are missing.
→ Explore early compliance risks flagged by the SEC.
Best practices for SEC Marketing Rule compliance
To stay compliant and mitigate risk, firms should:
- Retain audit-ready records of all ads, performance data, and disclosures
- Disclose testimonials, endorsements, rankings, and compensation clearly and consistently
- Present net and gross performance with equal prominence and proper timeframes
- Avoid cherry-picking or misleading claims in any format
- Establish review workflows across websites, social, and digital content
- Train teams on the rule and your internal policies
- Use AI and automation to flag risky content and streamline approvals
What Smarsh is doing to help you comply with the SEC Marketing Rule
The SEC Marketing Rule introduces more complexity into how firms advertise, especially across digital channels. Smarsh makes compliance easier with solutions that support the full lifecycle of marketing communications.
With Smarsh, you can:
- Capture and retain marketing content across websites, email, and social platforms
- Review and supervise testimonials, performance claims, and ratings
- Maintain audit-ready records that meet SEC retention standards
- Leverage AI to flag risk and reduce manual review
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