SEC Marketing Rule

SEC Marketing Rule & Testimonials: Crafting Your Disclosures

By  Brian Thorp

Disclaimer: In order to make Wealthtender free for our readers, we earn money from advertisers including financial professionals who pay to be featured on our platform. This creates a natural conflict of interest when we favor promotion of our clients over other professionals not featured on Wealthtender. Learn how we operate with integrity to earn your trust.

In this article, we’ll explain the specific disclosure requirements prescribed by the SEC for testimonials and endorsements to help you craft disclosures that are compliant with the SEC Marketing rule [Rule 206(4)-1]. Beyond regulatory compliance, we’ll also discuss how thoughtfully prepared disclosures help consumers make more informed and educated decisions when evaluating financial advisors.

And since it’s expected the most popular way to collect, display and promote testimonials and endorsements will be online reviews, we focus our discussion on disclosures in the context of reviews published on the internet.

⭐ At the end of the article, you’ll find an online review pre-publication checklist template you can download and use to ensure your testimonials and endorsements published online are compliant with SEC Marketing rule requirements.

The Role of Clear and Prominent Disclosures for Testimonials and Endorsements

To avoid the disclosure fatigue we’ve all grown accustomed to in advertisements frequently overshadowed by paragraphs of fine print, the SEC deserves credit for its refreshing approach emphasizing the value of clear and prominent disclosures to accompany online reviews. 

These clear and prominent disclosures are intended to provide consumers with important information to judge the merits of each review, including if:

  1. The reviewer is a client or non-client
  2. Cash or non-cash compensation was paid for the review
  3. Any material conflicts of interest exist that may have influenced the reviewer.

The SEC also expects clear and prominent disclosures to be the same font size as the written review, and visible alongside the review. In other words, clear and prominent disclosures effectively become a part of the review itself and cannot be hidden, or accessible only via a link.

And if you’re worried about your clear and prominent disclosures being too brief, don’t be. The SEC acknowledges the character limits of certain online platforms and further states ‘we expect that succinctly providing these disclosures will promote their salience and impact’.

Learn Our Concerns with Review Platforms like Google and Yelp

Why We Include Comparisons to Google and Yelp

If Google and Yelp are not compatible with the SEC Marketing rule, you may rightly be wondering why we’re discussing these platforms at all. 

Here’s What We Know with Certainty:

Google and Yelp are well-known review platforms popular with consumers. And financial advisors may already have unsolicited reviews written about them visible on these sites. If these are favorable reviews and are truly unsolicited, that’s terrific as advisors are gaining SEO benefits and visibility among consumers visiting these sites.

But because reviews on Google and Yelp lack the required SEC disclosures to be considered advertisements (e.g. testimonials and endorsements you can promote to grow your business), advisors can’t direct prospects to check out their reviews on these platforms. 

Here’s What We Don’t (Yet) Know:

Unlike unsolicited reviews published on Google or Yelp, the SEC has not formally offered guidance to clarify if solicited reviews on Google and Yelp are deemed an advertisement, and therefore subject to the prohibitions and disclosure requirements discussed throughout the SEC Marketing rule. So the question we need the SEC to answer is: Does the act of a financial advisor simply asking for a review to be written on specific platforms like Google or Yelp entangle an advisor in its creation and trigger the prohibitions and disclosure requirements?

While industry opinions are mixed on the guidance the SEC will ultimately provide, we believe it’s highly likely the SEC will take issue with advisors proactively soliciting reviews on platforms known to be incompatible with the Marketing rule. With its principles-based rule intended to ensure consumers gain important information to make more informed decisions, we don’t expect the SEC to look favorably upon a rampant proliferation of advisor reviews on platforms incapable of addressing the Marketing rule’s prohibitions and disclosure expectations.

Further, we believe the SEC could point to FINRA Regulatory Notice 17-18 that addresses this topic covering testimonials of registered representatives. In the notice, FINRA states: “FINRA does not regard unsolicited third-party opinions or comments posted on a social network to be communications of the broker-dealer or the representative for purposes of Rule 2210, including the requirements related to testimonials in paragraph (d)(6).”  

Wealthtender has submitted written requests for clarification on this matter to the SEC (likely along with many other industry participants) and we monitor the SEC’s Marketing rule FAQ page daily. We’ll update our Guide to Growing Your Advisory Business Playbook as additional SEC guidance becomes known.

Additional Disclosures for Testimonials and Endorsements

Rest assured, the SEC also expects you to include additional disclosures, both to expand upon any clear and prominent disclosures which warrant further explanation, and other required disclosures we’ll cover below. Importantly, unlike clear and prominent disclosures, these additional disclosures may be provided ‘through hyperlinks, in a separate disclosure document or any other similar methods’. 

Additional Considerations: Hybrid or Dually Registered Advisors

While this article is written primarily for SEC registered investment advisors and investment adviser representatives preparing for compliance with the SEC Marketing rule, it’s important for hybrid or dually registered advisors to concurrently satisfy their obligations for testimonials pursuant to FINRA’s rule 2210(d)(6). 

Fortunately, you’ll find FINRA’s requirements fit easily within the SEC Marketing rule framework. Hybrid or dually registered advisors should ensure online reviews also meet the following requirements:

  • If the review discusses the investment advice you provide or investment performance, the review must prominently disclose the following:
    • The fact that the testimonial may not be representative of the experience of other customers,
    • The fact that the testimonial is no guarantee of future performance or success, and
    • If more than $100 in value is paid for the testimonial, the fact that it is a paid testimonial
  • If the review discusses a technical aspect of investing, the reviewer must have the knowledge and experience to form a valid opinion

FINRA requires that disclosures be provided in close proximity to the review orthrough a clearly marked hyperlink accompanying the testimonial using language such as “important testimonial information,” provided of course that the testimonial is not false, misleading, exaggerated or promissory’. Accordingly, FINRA required disclosures not already addressed within SEC required disclosures can simply be included alongside the SEC required disclosures.

Preparing Disclosures for Testimonials and Endorsements

While we distinguish clear and prominent disclosures from additional disclosures above, it’s important to consider both types of disclosures holistically when you’re preparing disclosures to accompany an online review.

Specifically, the SEC requires that you disclose the following information at the time your online review is published:

Clear and Prominent Disclosures:

  • Is the reviewer a current client? Or non-client? (Note: past clients are generally considered non-clients; If they were a recent client, you should disclose as such)
  • Was cash or non-cash compensation provided for the review?
  • A brief statement of material conflicts of interest based on your relationship

Additional Disclosures:

  • The material terms of any compensation arrangement including a description of the compensation provided or to be provided, directly or indirectly to the reviewer for their review; If cash (or non-cash and a value is readily ascertainable), the amount should be disclosed; If a reduction in advisory fee, disclose the percentage and time period
  • A detailed explanation of any material conflicts of interest on the part of the person who wrote the review resulting from your relationship with the reviewer and/or any compensation arrangement; Specifically, the disclosure should explicitly state the reviewer has an incentive to recommend you due to such compensation

Beyond these disclosure expectations, in our article about preparing your policies and procedures for testimonials, we discussed prohibited content and unsubstantiated material statements of fact that could trigger additional disclosure requirements. By consistently following an online review pre-publication checklist to determine which disclosures are necessary to accompany your reviews, you’ll be all set.

Getting Started with Testimonials and Endorsements

We hope you found this article useful and we encourage you to read each of the articles in our SEC Marketing Rule Education Series for more ideas to compliantly attract new clients and grow your business with testimonials and endorsements.

Financial advisors embracing online reviews will lead the industry in attracting new clients throughout the historic transfer of wealth from Baby Boomers to Millennials over the next decade.

Online reviews establish a human connection with prospects, demonstrating your trustworthiness and increasing their confidence in contacting and hiring you. But online reviews are just one important part of an effective advisor marketing plan to strengthen your online reputation and attract new clients in today’s world.

At Wealthtender, we’re dedicated to helping you grow your business with our Modern Advisor Marketing™ platform that provides the knowledge and reassurance your future clients are looking for online to hire you with confidence and conviction.

Beyond our industry-first Certified Advisor Reviews™ designed for compliance with the SEC Marketing rule, financial advisors and wealth management firms that join Wealthtender gain recognition for their areas of specialization and SEO benefits to rank higher in Google search results.

Whether you choose to join our growing community of financial advisors and advisory firms on Wealthtender or prefer to grow on your own, we hope these articles help you achieve exceptional results with your online reviews for years to come.

If you have questions, feedback, or would like to discuss the SEC Marketing rule with us, please email yourfriends@wealthtender.com or call Wealthtender Founder and CEO Brian Thorp directly at (512) 856-5406.

About the Author
Brian Thorp, Founder and CEO of Wealthtender profile picture

About the Author

Brian Thorp

Brian is CEO and founder of Wealthtender. He and his wife live in Texas, enjoying the diversity of Houston and the vibrancy of Austin.

With over 25 years in the financial services industry, Brian is applying his experience and passion at Wealthtender to help more people enjoy life with less money stress.

Connect with Brian on LinkedIn

Disclaimer: In order to make Wealthtender free for our readers, we earn money from advertisers including financial professionals who pay to be featured on our platform. This creates a natural conflict of interest when we favor promotion of our clients over other professionals not featured on Wealthtender. Learn how we operate with integrity to earn your trust.

Leave a Reply

Your email address will not be published. Required fields are marked *