Advisors' testimonials and endorsements as well as the third-party ratings are still not in compliance with the Securities and Exchange Commission's Marketing Rule, according to a just-released risk alert.
In particular, the SEC's risk alert points to observations examiners have made regarding advisors’ disclosure requirements and oversight and compliance practices regarding testimonials and endorsements, as well as advisors’ due diligence and disclosure requirements under the third-party ratings provisions of the rule.
SEC exam staff reviewed advisors’ advertisements "disseminated to current or prospective clients or current or prospective investors in private funds advised by the investment adviser that included testimonials (which are statements from current clients or current investors in private funds advised by the investment adviser), endorsements (which are made by all other persons), or third-party ratings," the risk alert states.
The marketing rule is among the SEC's top exam priorities for 2026.
The risk alert points out that "disclosures are missing, poorly timed, or not clear and prominent," Tiffany Duncan-Magri, senior regulatory advisor at Smarsh, told ThinkAdvisor Wednesday in an email. "Firms continue to underestimate when referrals, lead generation firms, and influencers are endorsements. Compensation, conflicts, and promoter oversight are incompletely documented. Third-party ratings are used without adequate due diligence or required disclosures. These are not gray area issues; they are process failures."
Testimonials and Endorsements
The marketing rule prohibits the use of testimonials and endorsements in advertisements unless the advisor satisfies certain disclosure and oversight conditions. These provisions also prohibit advisors from compensating certain ineligible persons for providing testimonials or endorsements.
The SEC's exam staff observed advisors using testimonials and endorsements that did not appear to comply with all or some of the requirements for both compensated and uncompensated testimonials and endorsements, according to the alert.
"The most common observed reason that an endorsement or testimonial was observed to be non-compliant was that it did not provide the disclosures at the time the testimonial or endorsement was disseminated," the alert states.
"Such testimonials or endorsements were often presented on advisers’ websites, including websites using alternative business names of their supervised persons (“d/b/a” websites)," according to the alert.
Examiners also observed use of "lead-generation firms, social media influencers, and adviser referral networks, and offering 'refer-a friend' programs to current clients for de minimis compensation (in some instances without recognizing that certain arrangements created an endorsement or testimonial)," the SEC said.
Third-Party Ratings
The marketing rule prohibits the use of third-party ratings in advertisements, unless an advisor "has a reasonable basis for believing that any questionnaire or survey used in the preparation of the third-party ratings meet certain criteria and discloses certain information related to the ratings," the alert explains.
Examiners found that third-party ratings were often included on advisors’ websites (including d/b/a websites), as well as social media profiles or accounts, marketing brochures or pitchbooks, press releases, newsletters and blogs, among others.
SEC staff observed that many advisors using third-party ratings in ads updated their compliance policies and procedures to address this practice, but others did not.
Some advisors did not update their policies, while others had updated their policies and procedures but did not implement them, and others disseminated ads that did not appear to comply with the marketing rule, according to the alert.
For instance, examiners observed advisors "that included third-party ratings in their advertisements that did not clearly and prominently identify the date on which the ratings were given and the period of time upon which the ratings were based," the alert states. "In some cases, the third-party ratings were listed with reference to a range of years in which the adviser was the recipient of the third party rating, but the dates included by the adviser listed a year in which the adviser did not receive the award."
Another misstep: Advisors that paid third-party rating providers fees to be considered for the ratings but did not disclose such payments where the advisors posted the ratings, the alert states.
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