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The SEC Marketing Rule, formally known as Rule 206(4)-1 under the Investment Advisers Act of 1940, governs how registered investment advisors market their services to clients and prospects. It applies broadly, including to RIA firms offering digital investment advice, automated portfolios, or app-based investment features.
The rule was modernized in 2020 and became fully enforceable in 2022. It replaced outdated advertising and solicitation rules with a single, principles-based framework designed to regulate today’s digital marketing channels.
The SEC Marketing Rule now regulates modern practices, such as using testimonials, social media posts, and performance metrics with more precise guidelines and fewer gray areas.
This article provides a practical breakdown of the SEC Marketing Rule, with a focus on its application to fintech companies. It covers definitions, requirements, and common pitfalls, along with enforcement examples and a checklist for RIAs to evaluate compliance across channels and campaigns.
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013. If you need assistance with compliance or fintech regulations, click here.
What Counts as an Advertisement Under the SEC Marketing Rule?
Under the SEC Marketing Rule, the definition of “advertisement” is both specific and broad. The rule defines two primary categories, or “prongs,” that determine whether a message qualifies as an advertisement.
These definitions carry important compliance implications, particularly for RIA/fintech companies that rely on digital channels, automated messaging, or influencer partnerships to reach prospective clients.
First Prong: Public Marketing Communications
The first prong encompasses direct or indirect communications aimed at promoting investment advisory services to potential clients or investors in private funds.
It includes traditional advertising, defined as “any direct or indirect communication an investment advisor makes that: (i) offers the investment advisor's investment advisory services with regard to securities to prospective clients or private fund investors; or (ii) offers new investment advisory services with regard to securities to current clients or investors in a private fund advised by the same investment advisor.” (SEC Adopting Release No. IA-5653, 17 FR Part 275 and 279)
The first prong applies to any message distributed to more than one person if the content is promotional in nature.
Examples of materials that typically fall under this definition include:
Public website content describing advisory services
Mass marketing emails or newsletters
Social media posts promoting investment features or performance
Online videos and investor education webinars with promotional elements
Mobile app descriptions highlighting advisory capabilities
Importantly, the content does not need to resemble traditional advertising to fall under the rule. The deciding factor is whether the communication seeks to attract or retain clients by presenting the advisor’s services in a favorable light.
Second Prong: Paid Testimonials and Solicitations
The second prong covers any testimonial or endorsement that is made by an individual who receives direct or indirect compensation. This includes both financial and non-financial forms of payment, such as referral bonuses, discounts, or preferential service terms (SEC Adopting Release, 48).
Examples that fall under the second prong include:
Sponsored influencer content referencing an advisor’s platform or returns
Client referrals rewarded through incentive programs
Third-party endorsements published in exchange for access, exposure, or perks
If compensation is involved and the message promotes the advisor’s services, it is generally considered an advertisement, regardless of how the content is framed or distributed.
This has significant implications for how fintech companies structure affiliate programs, influencer partnerships, or testimonial campaigns.
Key Exclusions: What Is Not Considered an Advertisement
While the scope of the SEC Marketing Rule is broad, it also outlines several key exclusions.
Communications that fall outside the definition of “advertisement” include:
One-on-one communications tailored to a single client or investor
Responses to unsolicited requests for information
Mandatory regulatory filings or disclosures (e.g., Form ADV)
Educational content that does not offer or promote advisory services
However, these exclusions have limitations. For instance, messages that appear to be individualized but are actually distributed in bulk may still meet the threshold for advertisement. Similarly, hypothetical performance presented in a one-on-one setting may lose its exempt status if not properly documented or contextualized.
For fintech companies, especially those that automate client communications or operate at scale, these distinctions require careful analysis.
What Are the General Prohibitions Under the SEC Marketing Rule?
The SEC Marketing Rule not only defines what constitutes an advertisement but also regulates the content of advertisements. Specifically, it outlines general prohibitions that apply to all marketing communications, regardless of channel and format.
These prohibitions, designed to prevent misleading or deceptive content, include:
Misleading Statements or Omissions: Advertisements cannot include any untrue statements of material fact or omit facts necessary to prevent misleading impressions. This applies to claims about services, fees, team credentials, or performance.
Unsubstantiated Material Claims: All factual claims in advertisements must be backed by a reasonable basis. If requested, advisors must be able to provide documentation to the SEC to support those claims.
Misleading Use of Context or Presentation: Including information that is likely to cause an untrue or misleading implication or inference to be drawn.
Failure to Present Risks Alongside Benefits: If an advertisement highlights potential benefits, it must also include a fair and balanced discussion of material risks or limitations.
Misleading References to Specific Investment Advice: Must prohibit commentary where investment advice is presented in a manner that is not fair and balanced. Highlighting only successful recommendations or trades may be considered misleading.
These prohibitions apply to all types of marketing content, including text, video, and visual formats. For fintechs, that often means mandatory reviewing of in-app language, promotional emails, performance dashboards, and even how user testimonials are framed.
Testimonials and Endorsements: What is Allowed Now
One of the most notable changes under the SEC Marketing Rule is the allowance of testimonials and endorsements, which were previously prohibited but are now permitted under specific conditions.
For fintech firms that rely on client reviews, affiliate programs, or influencer partnerships, this aspect of the rule has a significant impact on their operations.
Required Disclosures for Testimonials and Endorsements
If an advertisement uses a testimonial or endorsement, the firm must disclose:
The individual giving the testimonial is a current client
The individual providing the statement of endorsement is not a current client
Whether the individual was compensated (financially or otherwise), including the material terms of the arrangement and a description of the compensation
Any material conflicts of interest
These disclosures must be presented prominently and in plain language. Hiding them behind hyperlinks or footnotes does not meet the requirement.
See also:
Oversight and Written Agreement Obligations
If compensation is involved, the firm must enter into a written agreement with the promoter. One exemption from the written agreement requirement applies when the individual providing the testimonial or endorsement receives $1,000 or less in the preceding 12 months. Additional exemptions from the written agreement are also available. This applies to individuals or entities offering testimonials, endorsements, or client referrals.
That agreement should include:
The scope of the promotional activity
The nature and amount of compensation
Compliance expectations (including adherence to the Marketing Rule)
In addition, firms are expected to oversee the activities of promoters. This may include reviewing messaging, requiring disclosures, and monitoring for compliance risks.
For fintech companies working with multiple marketing partners or affiliates, these obligations often require updates to workflows, documentation practices, and vendor onboarding processes.
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Disqualification of “Bad Actors” as Promoters
The rule also includes a disqualification provision. Individuals subject to certain regulatory or criminal findings, such as securities fraud or misconduct, are not permitted to act as compensated promoters.
As such, before entering into any paid promotional relationship, advisors must conduct research to confirm that the promoter is not disqualified under the rule.
This often means checking for regulatory history, reviewing public enforcement databases, or requiring promoters to confirm their eligibility in writing.
Fintech firms often assume that social proof, such as user reviews, influencer posts, or referral campaigns, falls outside of regulatory focus. Under the SEC Marketing Rule, that is no longer the case. These tactics can still be used, but only when structured with the proper disclosures, contracts, and controls.
Fintech teams move fast. We will assist you in building marketing workflows that can help you mitigate regulatory risks while supporting timely execution.
Third-Party Ratings: New Rules and Required Disclosures
The SEC Marketing Rule also addresses the use of third-party ratings that many fintech firms rely on to build credibility. These ratings are now permitted in advertisements, provided certain conditions are met.
A third-party rating is defined as a scoring or ranking of an investment advisor given by someone who is not a related person. This includes ratings given on a media outlet, review website, industry publication, or survey provider. If the rating is included in an ad and implies the quality of the advisor’s services, it falls under this rule.
To use a third-party rating in marketing materials, advisors must meet two requirements:
Structure of Rating: The advisor must have a reasonable basis to believe the structure of the rating allows for participants to provide both favorable and unfavorable responses and cannot be designed to produce predetermined results.
Clear Disclosures: Any advertisement that uses a third-party rating must include the following:
The date of the rating, along with the time period on which the rating was based
The identity of the third party that created the rating
Criteria used
Whether the advisor provided any compensation related to obtaining the rating
For example, your platform is listed as a “Top 10 Robo-Advisor” by a financial blog, and you want to promote that ranking on your website. You’ll need to explain how the ranking was determined and whether your company paid to be included.
Some of the common mistakes firms should avoid include:
Omitting context: Quoting a ranking without naming the source or survey scope can be misleading.
Failing to disclose compensation: Even small marketing fees paid to the rating provider must be disclosed.
Using outdated or expired ratings: The rule requires transparency around the timing of the rating.
Performance Advertising Under the SEC Marketing Rule: Key Requirements
Many fintech firms utilize performance data to attract new users through dashboards, app store descriptions, or promotional emails. Under the SEC Marketing Rule, advisors can still present performance, but only under strict conditions.
The rule outlines several requirements that apply to how performance is calculated, displayed, and disclosed. These are intended to prevent misleading impressions and cherry-picked results.
Presenting Gross vs. Net Performance
If gross performance is shown (before fees and expenses), net performance (after costs) must also be presented. Net performance should be calculated within the same time period and using the same methodology, and displayed with equal prominence.
This applies to everything from website disclosures to slide decks used in investor meetings.
For example, if a platform advertises a gross return of 12%, it must also show the net return after fees and place both figures side by side, not in a footnote.
One-Year, Five-Year, and Ten-Year Performance Periods
When presenting performance to an audience, advisors must include returns for standardized periods of 1 year, 5 years, and 10 years (or life of the portfolio, if shorter).
All figures must be calculated through the same recent period end date, such as calendar year-end.
This requirement helps to evaluate performance with proper context, not just based on short-term spikes.
Avoiding Cherry-Picking (Related & Extracted Performance)
The rule prohibits selective presentation of performance results that misrepresent the advisor’s overall track record.
The most common issues firms should avoid include:
Related performance: If the performance is shown for only one portfolio or strategy, a firm may need to present the results of all similar accounts.
Extracted performance: If a firm highlights a portion of a portfolio (e.g., just the tech stocks), it must also provide context for the full portfolio.
To avoid misrepresenting performance, if a marketing team wants to spotlight a standout portfolio, compliance experts should review how that portfolio compares to others under the same strategy. InnReg can help your team develop internal review processes to spot potential issues early and maintain rule-focused disclosures.
See also:
No Implied SEC Approval of Performance Results
Advisors cannot imply that performance has been reviewed or endorsed by the SEC. Even indirect references, such as “compliant with SEC guidelines” and similar formulations, can create risk if they suggest regulatory approval.
As such, firms should avoid phrases that might mislead readers about the SEC’s role in reviewing their marketing content.
Predecessor Performance: Using Prior Track Records
Fintech founders often want to showcase performance from a previous firm or product.
This is permitted only if:
The team responsible for the prior performance is now managing accounts at the advertising advisor.
The accounts managed at the prior firm are substantially similar to accounts managed at the current advisor.
All accounts that were managed in a substantially similar manner are advertised, unless the exclusion of any account does not result in materially higher performance, nor alters the presentation of applicable time periods.
All relevant disclosures are provided, including the fact that the performance results were in accounts managed at another entity.
Without meeting these conditions, predecessor performance should not be included in marketing materials.
Does the SEC Marketing Rule Allow Hypothetical Performance in Ads?
The SEC Marketing Rule allows hypothetical performance only under very specific conditions.
Hypothetical performance, including model portfolios, backtested strategies, projections, and target returns, is permitted under the SEC Marketing Rule, provided it is used carefully and with proper controls in place.
Using a hypothetical performance in ads has been shown to carry a high risk. The SEC has already brought enforcement actions against firms that published hypothetical results without meeting the rule’s requirements.
What Qualifies as Hypothetical Performance?
The rule defines hypothetical performance as any performance result that was not actually achieved by a specific portfolio.
Common fintech examples include:
Algorithmic or backtested trading models
Projected returns based on simulated scenarios
Illustrations of what a strategy would have done in prior markets
Target return estimates that are built into financial planning tools
If the data is not tied to a real investor account, it falls under this category.
When and How You Can Use It
The rule allows hypothetical performance only if all of the required conditions are met, including:
Policies and procedures are in place: The advisor must have written procedures designed to ensure hypothetical performance is only shown to people for whom it is relevant.
Disclosures are clear and specific: The presentation must include details on the criteria used and the assumptions made in calculating the hypothetical performance. Additionally, the information must include sufficient details for the reader to understand the risks and limitations associated with using the hypothetical performance in making investment decisions.
The audience is appropriate: A hypothetical performance should not be shown in mass marketing to a retail audience, as the information must align with the readers’ financial situation and investment objectives.
Consider a firm that wants to display backtested results on a public-facing website or in an app store description. This would likely violate the rule because some investors will have different financial situations and investment objectives. The same results could potentially be presented in a pitch deck for institutional investors if all other conditions are met.
Form ADV and Recordkeeping Requirements Under the SEC Marketing Rule
The SEC Marketing Rule also affects how firms document and report their marketing practices.
Two areas are critical: updating Form ADV and maintaining records that support all advertisements.
What Needs to Be Disclosed in Form ADV
The rule introduced new questions in Part 1A of Form ADV. These questions ask whether the advisor:
Uses performance results in advertisements
Includes testimonials or endorsements
Features third-party ratings
Displays hypothetical performance
Each response must reflect current practices. When a marketing strategy changes, for example, if a firm starts paying influencers or using model portfolio results, Form ADV must be updated accordingly.
Misstatements on Form ADV can be flagged during exams and may lead to follow-up scrutiny.
See also:
What Records Must Be Kept, and for How Long
The amended books and records rule (Rule 204-2) requires firms to keep detailed records related to all advertisements.
This includes:
Copies of every ad (digital, print, video, social media, etc.)
Documentation for performance claims (e.g., spreadsheets, formulas, inputs)
Written agreements with promoters or endorsers
Disclosures presented to clients or prospects
Records showing the audience for hypothetical performance content
These records must be kept for at least five years, with the first two years easily accessible on-site or in a retrievable format.
If a firm fails to produce required documentation, such as backup for performance claims or a copy of a removed social media post, that alone can result in findings.
What Happens If You Violate the SEC Marketing Rule? (SEC Enforcement)
Since the SEC Marketing Rule took effect, the agency has taken an active enforcement stance. Several advisors, including those from fintech firms, have been charged with violations related to hypothetical performance, misleading disclosures, and inadequate oversight of marketing practices.
Here are some of the most common issues that have triggered enforcement actions:
Publishing hypothetical performance to retail audiences without required disclosures or procedures
Failing to keep documentation supporting performance claims
Omitting or minimizing risks when promoting a strategy
Using testimonials or endorsements without proper disclosures
Highlighting cherry-picked performance without fair context
Implying that the SEC reviewed or approved marketing content
In most cases, the SEC emphasized that the firms either lacked internal controls or failed to follow the specific requirements of the rule.
It is worth noting that violations don’t have to be intentional to draw scrutiny. Even well-meaning marketing efforts, such as showcasing an app’s performance or highlighting positive reviews, can become liabilities if compliance isn’t involved early in the process.
The SEC is particularly sensitive to anything that could mislead retail investors, including:
Bold claims not backed by data
Disclosures buried in fine print or behind links
Testimonials that omit compensation details
Social media campaigns that bypass review
SEC Marketing Rule Compliance Checklist
For fintech teams navigating fast product cycles, growth targets, and regulatory obligations, building a practical compliance framework around the SEC Marketing Rule is critical.
This checklist covers core areas to help you review marketing activities and spot potential issues early:
Identify which communications qualify as “advertisements” under the rule. This should include websites, email campaigns, in-app messages, social media, and video content, as well as tag testimonial, performance, or rating-related content for deeper review.
Confirming that materials are factually accurate
Checking for omissions, misleading context, or cherry-picked results
Including risks and limitations wherever benefits are discussed
Avoiding any language that suggests SEC approval or endorsement
Include required disclosures for all testimonials and endorsements, and state whether a promoter is a client and if compensation was provided. Furthermore, include methodology and compensation info for third-party ratings.
Finally, disclose any assumptions and risks tied to performance and projections.
When advertising performance, you must present gross and net results side by side, using the same time periods and methodologies. For retail audiences, performance must be shown over standardized 1, 5, and 10-year periods, or over the life of the portfolio if it has not existed that long. If you use predecessor performance or hypothetical data, ensure it meets all the specific conditions outlined in the rule before including it in any advertisement.
Be extra cautious when advertising hypothetical performance. Confirm policies are in place to restrict use to qualified audiences and provide detailed disclosures about methods, assumptions, and risks. Additionally, avoid publishing hypothetical results in general marketing or retail-facing channels.
Form ADV must accurately reflect your current marketing practices. If your firm uses testimonials, endorsements, performance data, or third-party ratings in advertisements, that information must be disclosed in the appropriate sections. Whenever your marketing strategy changes, such as adding new promotional channels or compensation arrangements, you should amend the form promptly to maintain consistency with actual practices.
Firms are required to retain all advertisements for a minimum of five years, with the first two years readily accessible. You must also keep supporting documentation for any factual statements or performance claims used in marketing. This includes maintaining written agreements and disclosures related to promoters, influencers, or marketing partners. For fintech companies, this also includes app notifications, video scripts, and social media content.
Extend the training you provide beyond the compliance team to other relevant teams. Marketing, growth, and product teams must understand what constitutes advertising under the SEC Marketing Rule and how their work may be impacted.
Please note that this checklist does not replace legal advice or a formal compliance program; however, it provides fintech teams with a structured approach to operationalizing the rule on a day-to-day basis.
The SEC Marketing Rule provides investment advisors with more flexibility to communicate with current and prospective clients, but that flexibility comes with higher expectations.
For fintech companies, especially those operating at a rapid pace or in complex regulatory environments, the rule touches nearly every aspect of the marketing function, from testimonials and performance results to third-party ratings and app notifications.
If compliance isn’t integrated into the creative process early on, the risk of missteps increases. The SEC has made it clear that enforcement is active, and even technical violations, such as missing disclosures or weak documentation, can result in penalties.
How Can InnReg Help?
InnReg is a global regulatory compliance and operations consulting team serving financial services companies since 2013.
We are especially effective at launching and scaling fintechs with innovative compliance strategies and delivering cost-effective managed services, assisted by proprietary regtech solutions.
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Published on Jul 4, 2025
Last updated on Jul 4, 2025
