SEC's New Marketing Rule

The Securities and Exchange Commission's updated marketing rule has been in effect for several years now, but many advisors are still grappling with its implications and requirements. The rule, which modernized the previous advertising and cash solicitation rules, continues to evolve through regulatory guidance and enforcement actions.

Key Components of the Current Marketing Rule

The SEC's marketing rule represents a principles-based approach that applies to various forms of advisor communications. As we move through 2025, these are the essential elements that every advisor needs to understand:

1. Expanded Definition of "Advertisement"

The rule maintains a broad definition of what constitutes an advertisement, covering:

• Traditional communications like brochures, pitch books, and presentations
• Digital content including social media posts, videos, and podcasts
• Communications to a single person that include hypothetical performance
• Most communications with private fund investors

Recent enforcement actions have highlighted the SEC's broad interpretation of marketing materials, including casual communications that contain investment recommendations or performance discussions.

2. Performance Advertising Requirements

Performance advertising continues to be an area of intense regulatory scrutiny. Current requirements include:

• Presentation of net performance alongside gross performance
• Appropriate time periods for performance results
• Strict guidelines for presenting related performance
• Extensive documentation requirements for hypothetical performance
• New standards for predecessor performance

The 2025 examination priorities specifically highlight performance advertising as a focus area, with examiners paying particular attention to documentation of calculation methodologies.

3. Testimonials and Endorsements

The rule permits advisors to use testimonials and endorsements, subject to:

• Clear and prominent disclosure of material conflicts of interest
• Disclosure of whether the person giving the testimonial/endorsement is a client and whether they were compensated
• Written agreements with promoters (with certain exceptions)
• Advisor oversight and compliance with disqualification provisions

Recent regulatory guidance has emphasized the need for comprehensive disclosures, particularly regarding compensation arrangements and material conflicts.

4. Third-Party Ratings

Advisors using third-party ratings in their marketing must:

• Ensure the rating clearly reflects a mathematical process
• Conduct due diligence on the rating methodology
• Disclose the date of the rating and period it covers
• Prominently disclose who created the rating and any compensation provided

Enforcement Trends and Regulatory Focus

The SEC's enforcement priorities regarding the marketing rule have evolved in recent months. Key focus areas include:

• Misleading performance presentations, particularly regarding fee impacts
• Substantiation of claims about investment strategies or results
• Disclosures related to rankings and awards
• Social media compliance, especially regarding influencer partnerships
• Documentation of compliance policies and procedures

Best Practices for Advisors in 2025

To navigate the current regulatory environment effectively, advisors should:

1. Implement a robust pre-review process: Ensure all marketing materials are reviewed by compliance before publication
2. Maintain comprehensive documentation: Document the basis for all performance calculations and substantiate all claims
3. Develop clear policies: Create specific policies addressing each component of the marketing rule
4. Train all personnel: Ensure everyone understands what constitutes marketing and the applicable requirements
5. Conduct regular audits: Periodically review marketing materials for continued compliance

With the SEC continuing to refine its approach to marketing regulation, advisors must stay vigilant and adaptable. By understanding the current regulatory environment and implementing robust compliance practices, advisors can effectively communicate their value while minimizing regulatory risk.