How The SEC is Actually Enforcing The Marketing Rule: A Checklist To Ensure Compliance Policies Meet The Mark
- Isaac Mamaysky
- Dec 3
- 2 min read
This article was written for and originally appeared on the Kitces Nerd's Eye View blog. The link to the full article follows the Kitces executive summary.
Kitces Executive Summary
As financial advisers strive to communicate value and differentiate themselves in a competitive landscape, the SEC's new Marketing Rule has significantly reshaped the compliance obligations tied to how firms advertise and promote their services. Now, three years into its implementation, the rule has proven to be more than a technicality: it represents a foundational component of the SEC's regulatory framework. With several high-profile enforcement actions already announced, it's increasingly clear that the SEC considers Marketing Rule compliance a top-tier priority. The rule fundamentally redefines how firms communicate with prospects and clients, making it essential for advisers to engage directly with the rule's requirements rather than delegate them entirely to compliance departments.
In this article, Isaac Mamaysky, Partner of Potomac Law Group and Cofounder of QuantStreet Capital, explores the key takeaways from the SEC's enforcement of the Marketing Rule – and how advisory firms can implement their marketing strategies confidently without fear of regulatory action.
At its core, the Marketing Rule reinforces the general anti-fraud principles that underlie the Federal securities laws. These principles include ensuring that advertising is not misleading, material statements of fact can be substantiated, and all investment advice is presented in a way that is fair and balanced.. The rule also governs how performance results can be presented in advertisements and how advisers may use client testimonials and third-party endorsements.
However, in the years since the Marketing Rule's compliance date, the SEC's enforcement activity has also underscored the areas of greatest regulatory focus. Hypothetical performance – especially when shared via publicly accessible websites – has consistently triggered enforcement actions, highlighting concerns about misleading unsophisticated investors. Firms have been penalized for sharing backtested or model performance with general audiences without vetting the recipients. The SEC has also brought charges over unsubstantiated claims, misuse of third-party ratings without proper disclosure, and paid endorsements or testimonials lacking requisite transparency. Collectively, these actions reflect a broader regulatory theme: marketing practices must reflect not only technical compliance but also fair, honest, and substantiated communication consistent with investor protection goals.
Advisers can take several steps to assess and reinforce their marketing compliance. Reviewing the Marketing Rule itself – surprisingly accessible at under 3,500 words – can help clarify its intent and applicability. Updating compliance manuals to reflect the new rule, rather than legacy advertising and solicitation guidance, is essential. From there, a detailed checklist covering definitions, prohibited practices, disclosures, performance standards, and documentation can help ensure policies are comprehensive and current. Testing those policies against hypothetical scenarios – such as athlete endorsements, mass mailings of hypothetical performance, or adviser-requested online reviews – can further refine understanding and reveal implementation gaps.
Ultimately, the key point is that the Marketing Rule is now firmly entrenched in the compliance expectations governing advisory firms' external communications. Advisers who approach the rule not as a compliance formality but as a guidepost for transparency and professionalism will be better positioned to communicate effectively, avoid regulatory pitfalls, and strengthen client trust. By aligning marketing practices with both the letter and spirit of the rule, advisers can elevate their messaging and reinforce the integrity at the heart of every great client relationship!