How the SEC Marketing Rule turned a long-standing ban into conditional permission, what every testimonial must disclose, and where state-registered advisers stand after NASAA’s 2026 amendments

Yes, an SEC-registered investment adviser can use testimonials, but only under the conditions set by the SEC Marketing Rule. The adviser must clearly disclose whether the person is a client, whether they were paid and any material conflicts of interest, must oversee the testimonial’s compliance with the rule, and in most cases must have a written agreement with anyone it pays to promote it.

The answer for state-registered advisers is less settled. NASAA’s model rules historically banned testimonials, and although NASAA approved amendments in May 2026 that allow states to permit them under guardrails similar to the SEC’s, each state must adopt the change before it applies there.

This guide explains what counts as a testimonial, the conditions under the Marketing Rule, the general prohibitions that apply to all adviser marketing, how the state position is changing, how broker-dealer rules differ, worked examples, the exam traps and five practice questions.

What Is a Testimonial?

Under the SEC Marketing Rule, a testimonial is a statement by a current client or private fund investor about their experience with the adviser or its staff. It also includes a statement by a client that directly or indirectly solicits or refers people to become clients.

An endorsement is the same kind of statement made by someone who is not a current client or investor. A professional athlete praising an adviser in an advertisement, for example, is giving an endorsement rather than a testimonial.

The rule treats testimonials and endorsements together, with the same conditions. Both are attractive to advisers because they offer social proof, and both carry the same risk of misleading prospective clients.

From Ban to Permission

For more than sixty years, the SEC’s advertising rule effectively banned testimonials in investment adviser advertising. The concern was that a happy client’s story could give a misleading picture of the experience every client could expect.

In December 2020 the SEC adopted a new Marketing Rule, SEC Rule 206(4)-1, which replaced both the old advertising rule and the separate cash solicitation rule. Advisers had to comply by 4 November 2022.

The new rule moved from a ban to a principles-based approach. Testimonials and endorsements are now permitted, provided the adviser meets disclosure, oversight and disqualification conditions.

Where This Topic Appears on the Exams

Testimonials appear in the laws and regulations section of the Series 65 and on the Series 66, usually as part of questions on adviser advertising. Questions may ask whether a testimonial is permitted, what must be disclosed, or how the federal and state rules differ.

FRC’s Series 65 Exam Preparation course covers adviser advertising and the Marketing Rule chapter by chapter, and the Series 65 needs no sponsoring firm. The Series 7 Exam Preparation course covers the separate communications rules for broker-dealers, and the SIE Examination Preparation course introduces both.

Every FRC course can be spread across interest-free monthly payments, so cost is no reason to delay. Because these rules have changed recently, it is worth making sure your study materials reflect the current position.

Condition One: Disclosure

An adviser that uses a testimonial or endorsement must clearly and prominently disclose whether the person giving it is a current client or investor. The audience needs to know whether they are hearing from a customer or from an outsider.

The adviser must also disclose whether the person was paid, in cash or in any other form, and must describe any material conflicts of interest that arise from the person’s relationship with the adviser. A testimonial from a client who receives a fee discount for referrals, for example, carries a conflict that must be disclosed.

These core disclosures must appear with the testimonial itself, not hidden in a footnote or on a separate page. Further details, such as the material terms of any compensation arrangement, must also be provided.

Condition Two: Oversight

The adviser must have a reasonable basis for believing that each testimonial or endorsement complies with the Marketing Rule. It cannot simply publish whatever a client or promoter says.

In practice, oversight means reviewing testimonials before they are used, checking that they are not misleading and making sure the required disclosures accompany them. It also means monitoring paid promoters to ensure they follow the rules.

The adviser is responsible for testimonials it uses or adopts, even if someone else wrote them. A testimonial that misleads prospective clients is the adviser’s violation, not just the client’s.

Condition Three: Written Agreements With Promoters

If the adviser pays a promoter, such as a client or an outside firm that refers new business, it must generally have a written agreement with that person. The agreement must describe the scope of the promoter’s activities and the terms of the compensation.

There are exceptions. No written agreement is needed for a promoter who is an affiliate of the adviser, or for a promoter paid $1,000 or less in total over the preceding twelve months.

This condition replaced the old cash solicitation rule. Paying for referrals is still allowed, but the arrangement must be documented and disclosed.

Condition Four: Bad Actor Disqualification

An adviser cannot pay a person for a testimonial or endorsement if that person is disqualified because of certain disciplinary history. The disqualifying events include specified SEC orders, criminal convictions and court injunctions within set look-back periods.

The aim is to stop advisers from using promoters with a history of misconduct. A promoter who has been barred or convicted for securities fraud should not be paid to bring in new clients.

The disqualification provision does not apply to uncompensated testimonials or to promoters within the $1,000 de minimis threshold. It applies to paid promotion, where the risk of abuse is greatest.

The Four Conditions at a Glance

These four conditions apply to every testimonial and endorsement used by an SEC-registered adviser. Failure on any one of them makes the testimonial a violation.

The General Prohibitions

Every piece of adviser marketing, including testimonials, is also subject to seven general prohibitions. An advertisement must not include an untrue statement of material fact, or omit a material fact needed to make it not misleading.

It must not include a material statement of fact that the adviser cannot substantiate on demand, or make implications that would lead a reasonable person to a false conclusion. It must not discuss potential benefits without a fair and balanced treatment of the material risks.

It must not refer to specific investment advice in a way that is not fair and balanced, must not present performance results in a way that is not fair and balanced, and must not otherwise be materially misleading. A glowing testimonial that implies every client earns the same results would breach these prohibitions even if all four conditions were met.

Online Reviews and Social Media

Clients increasingly review advisers on third-party websites and social media. These reviews are not automatically the adviser’s testimonials, but they can become so.

If the adviser adopts a review, for example by sharing it on its own website, or becomes entangled in it, for example by editing it or selecting only the favorable ones, the review is treated as the adviser’s own advertisement. All of the Marketing Rule’s conditions then apply.

An adviser that simply allows reviews on an independent platform, without influencing which ones appear, is generally not treated as using them. The distinction turns on the adviser’s involvement.

Third-Party Ratings

The Marketing Rule also permits advisers to advertise third-party ratings, such as rankings in industry surveys, subject to conditions. The rating must come from a person who provides such ratings in the ordinary course of business, and any questionnaire behind it must be designed to give an equal chance of favorable and unfavorable answers.

The adviser must disclose the date of the rating, the period it covers, the identity of the third party and whether the adviser paid to obtain or use it. These disclosures let prospective clients judge how much weight to give the rating.

Ratings are tested less often than testimonials, but they appear in questions on adviser advertising. The pattern is the same: permitted, with disclosure.

How the State Rules Are Changing

State-registered advisers are governed by their own state’s advertising rules, most of which are based on NASAA’s model rules. Historically, those model rules treated testimonials in adviser advertising as a prohibited practice.

On 4 May 2026, NASAA’s members approved amendments to its model rules that create a framework under which states may permit testimonials, endorsements, ratings and certain performance advertising, under guardrails similar to the SEC Marketing Rule. The amendments were first proposed for public comment in July 2025.

NASAA writes model rules, not binding law, so each state must adopt the amendments before they take effect there. Until a state does so, its existing rules apply, which in many states still means that testimonials are prohibited for state-registered advisers.

What This Means for the Exam

Exam questions on testimonials usually test the difference between the federal and state positions. Under the SEC Marketing Rule, testimonials are permitted with conditions.

Under the traditional state model rules, testimonials in adviser advertising were prohibited. Because the state position is now changing, candidates should check how their study materials describe it and read each question carefully for whether it refers to federal or state rules.

When in doubt on a state question, remember that the change requires each state to act. A state-registered adviser should never assume testimonials are allowed without confirming its own state’s current rule.

How Broker-Dealer Rules Differ

Broker-dealers are not subject to the SEC Marketing Rule. Their communications are governed by FINRA Rule 2210, which has long permitted testimonials in retail communications, subject to its own conditions.

Under FINRA’s rules, a testimonial in a retail communication must make clear that the experience may not be representative of other customers and is no guarantee of future performance. If the person giving it was paid more than a nominal sum, the communication must say so.

A dual registrant must apply the right rule to each communication. Advertising for brokerage services follows FINRA’s rules, while advertising for advisory services follows the Marketing Rule.

Testimonials and the Fiduciary Duty

The Marketing Rule sits alongside the adviser’s fiduciary duty. Even a technically compliant testimonial can raise concerns if it creates expectations the adviser knows it cannot meet.

Paid referral arrangements also create conflicts of interest. A client who earns a reward for each referral has an incentive to recommend the adviser whether or not it suits the person they are referring.

FRC’s guide to what conflicts of interest an investment adviser must disclose covers how these conflicts are disclosed. Disclosure is what turns a hidden conflict into one the client can weigh for themselves.

Recordkeeping

Advisers must keep records of their advertisements, including testimonials and endorsements, under the SEC’s books and records rule. They must also keep records of the disclosures provided and of written agreements with promoters.

Advisers report their marketing practices to the SEC in Part 1A of Form ADV, including whether they use testimonials, endorsements or third-party ratings. Examiners use these answers to decide which advertisements to review.

The adviser’s compliance program must cover marketing as one of its core areas. FRC’s guide to what Rule 206(4)-7 requires of an investment adviser explains how those policies are built and reviewed.

Worked Example: The Website Quote

An SEC-registered adviser wants to place a quote from a long-standing client on its website: “My adviser helped me plan for retirement with confidence.” The client receives nothing in return.

The quote is a testimonial and is permitted under the Marketing Rule. The adviser must clearly disclose that the person is a current client and that they were not paid, and must have a reasonable basis to believe the quote is not misleading.

The adviser should also check that no material conflict exists. If the client is a relative of an employee, for example, that relationship would need to be disclosed.

Worked Example: The Paid Referral Partner

An SEC-registered adviser agrees to pay an accountant a fee for every client the accountant refers. The fees are expected to total several thousand dollars a year.

The accountant is a compensated promoter giving endorsements. The adviser needs a written agreement describing the arrangement, must make the required disclosures to referred clients and must check that the accountant is not disqualified.

If the total payments were $1,000 or less over twelve months, no written agreement would be needed. The disclosure requirements would still apply.

Worked Example: The State-Registered Adviser

A state-registered adviser sees competitors using client testimonials and wants to add some to its own website. Its home state has not yet adopted NASAA’s 2026 amendments.

The SEC Marketing Rule does not govern this adviser. Its state rules apply, and in a state that still follows the traditional model, testimonials in adviser advertising remain prohibited.

The adviser should not use testimonials until its state adopts a rule permitting them. Once that happens, it must follow the state’s conditions, which are expected to be similar to the SEC’s.

The Exam Traps

The first trap is assuming testimonials are still banned for SEC-registered advisers. Since the Marketing Rule took effect in November 2022, they are permitted with conditions.

The second trap is assuming the SEC rule applies to state-registered advisers. Their state rules govern, and many states still prohibit testimonials.

The third trap is forgetting the disclosure that a person was paid. Compensation in any form, cash or non-cash, must be clearly disclosed.

The fourth trap is confusing adviser rules with broker-dealer rules. Broker-dealer communications follow FINRA Rule 2210, not the Marketing Rule.

FRC’s guide to Series 65 ethics and laws questions and exam traps covers more traps in this area. For the full list, see FRC’s guide to Series 65 exam traps and common mistakes.

A Memory Aid

Remember “who, paid, conflict.” Every testimonial must disclose who the person is in relation to the adviser, whether they were paid and any conflict of interest.

For the federal and state split, remember “SEC says yes with conditions, states must say yes first.” The federal rule permits testimonials, while each state must adopt its own permission.

Practice Questions

Question one: may an SEC-registered adviser use client testimonials in its advertising? Yes, under the Marketing Rule, provided it meets the disclosure, oversight, written agreement and disqualification conditions.

Question two: what must be disclosed with a testimonial? Whether the person is a current client, whether they were compensated and any material conflicts of interest.

Question three: is a written agreement required with a promoter paid $800 over the past year? No, promoters paid $1,000 or less in the preceding twelve months are exempt from the written agreement requirement.

Question four: does the SEC Marketing Rule apply to state-registered advisers? No, state-registered advisers follow their own state’s advertising rules.

Question five: which rule governs testimonials in a broker-dealer’s retail communications? FINRA Rule 2210.

Related Questions

Testimonials are one part of how advisers attract clients. FRC’s guide to what a registered investment adviser is explains which advisers register with the SEC and which with the states, the distinction that decides which advertising rules apply.

Get Exam-Ready

Testimonial questions reward candidates who know both the federal conditions and the state position. Once “who, paid, conflict” and the federal and state split are clear, these become quick marks.

The FRC dictionary is more than a dictionary. It is a library of explainer videos, written explanations and on-page quizzes covering the FINRA and SEC rules you are tested on, so you can open any term and go deeper whenever a question catches you out.

Study With FRC

FRC’s programs and memberships are open to everyone. Whether you are preparing for the Series 65, the Series 7, the SIE or a combination, structured exam preparation turns topics like adviser marketing into marks you can rely on.

FRC’s Professional Membership adds verified progress and a Digital Profile, so when you apply to advisory firms, hiring managers can see your exam progress and the knowledge you are building, not just read about it on a resume. A Video Resume then lets them see how you present yourself before you ever meet.

Your Next Step

An SEC-registered investment adviser can use testimonials and endorsements under the Marketing Rule, provided it discloses client status, compensation and conflicts, oversees compliance, signs written agreements with paid promoters and avoids disqualified promoters. State-registered advisers follow their own state’s rules, which in many states still prohibit testimonials until NASAA’s 2026 amendments are adopted.

Remember “who, paid, conflict,” and you will be ready for every version of this question the exam can ask.