One of the most talked-about changes in the SEC Marketing Rule was permitting testimonials and endorsements, client praise and third-party recommendations, in adviser advertising. The permission is real, and so are the conditions, which routinely trip up firms that treat online reviews and referrals casually.
When an adviser uses a testimonial or endorsement, it must generally disclose whether the person giving it is a client, whether they were compensated, and any material conflicts of interest. These disclosures usually must be clear and prominent, delivered alongside the testimonial itself. A glowing quote without its required disclosures is a violation, not a marketing win.
The rule requires the adviser to have a reasonable basis to believe the testimonial complies with the rule, and, for compensated testimonials and endorsements above a threshold, a written agreement with the promoter. Certain people are disqualified from being paid promoters. This means a firm cannot simply repost praise; it needs a process for reviewing and documenting it.
Online reviews and social media blur the line between organic praise and advertising. If an adviser uses or invites reviews as advertising, the rule can apply, which is why firms need a clear policy on what they can and cannot amplify. When in doubt, it belongs in a compliance review before it goes public.
Amplify praise carefully, or not at all.
Greenridge L&C Advisors is a compliance consultancy, not a law firm. This is general information, not legal advice.