By Lindsay Burckett-St. Laurent, Senior Managing Director and Andrew Ho, Associate Director
On December 16, 2025, the Securities and Exchange Commission’s (SEC) Division of Examinations issued a Risk Alert highlighting persistent deficiencies under the Marketing Rule (Rule 206(4)-1). The alert focuses on three areas where advisers continue to fall short:
- Testimonials and endorsements
- Oversight and compliance integration
- Third-party ratings
The SEC’s observations reflect areas where compliance weaknesses remain common leading to growing scrutiny of digital marketing, social media promotion and private fund solicitation.
Key findings
1. Testimonials and endorsements
Examiners continue to identify failures in disclosure requirements, particularly in social media and referral programs. Common issues include:
- Missing or generic disclosures about promoter status, compensation and conflicts of interest
- Lack of written agreements with compensated promoters
- Payments to ineligible individuals with disciplinary histories
Disclosures must be clear, specific and prominently displayed. Generic statements are insufficient and may be deemed misleading.
3. Oversight and compliance weaknesses
The Risk Alert emphasizes that written policies alone do not satisfy Rule 206(4)-7. Advisers must:
- Implement active supervision of testimonial and endorsement activity
- Monitor referral arrangements and verify promoter eligibility
- Evidence compliance through documented controls and testing
This is not a paperwork exercise; the SEC expects endorsement oversight to function as part of a firm’s core compliance framework.
3. Third-party ratings
Advisers using awards or rankings in advertisements often fail to:
- Conduct due diligence on rating methodologies
- Disclose the rating provider, time period assessed and any compensation paid
Incomplete disclosures undermine credibility and may mislead investors. Robust diligence and transparency are essential to avoid heightened exam scrutiny.
4. Recordkeeping
The SEC also expects firms to maintain supporting documentation, including:
- Questionnaires or surveys underlying ratings
- Archived social media content and marketing approvals
- Written agreements with promoters
Failure to retain these records can result in additional deficiencies during examinations.
Immediate steps for compliance teams
- Review all promotional content for testimonial and rating disclosures
- Audit promoter agreements and confirm eligibility
- Document due diligence processes for third-party ratings
- Integrate Marketing Rule compliance into audits, training, and supervisory reviews
This Risk Alert signals intensified SEC scrutiny of digital marketing and private fund solicitation. Social media, referral programs and third-party platforms are now common exam focus areas. Advisers should treat digital marketing as a comparable risk to traditional advertising to reduce examination and enforcement exposure.
How we can help
IQ‑EQ supports advisers in building exam-ready Marketing Rule compliance frameworks. Our services include:
- Marketing and advertising reviews to assess promotional content and referral arrangements
- Gap analysis and compliance testing for testimonial oversight and third-party ratings
- Drafting promoter agreements and disclosure templates
- Employee training on Marketing Rule requirements and digital marketing risks
Our U.S. regulatory compliance team provides both immediate remediation support and long-term strategic partnerships to help you maintain compliant marketing practices. Get in touch today to learn more.
