§ 275.206(4)-1 — Investment adviser marketing rule.

The Marketing Rule, adopted in December 2020 with a compliance date of November 4, 2022, replaced the Commission's prior advertising rule (former Rule 206(4)-1) and also rescinded the separate cash-solicitation rule (former Rule 206(4)-3). The two rules are now a single unified marketing regime. For "supersedes" purposes, the predecessor cash-solicitation rule (17 CFR 275.206(4)-3, rescinded) is the clearest predecessor citation; firms may reference either predecessor in their compliance history.

(a) General prohibitions.

It shall be unlawful, within the meaning of section 206(4) of the Act (15 U.S.C. 80b-6(4)), for any investment adviser registered or required to be registered under section 203 of the Act (15 U.S.C. 80b-3), directly or indirectly, to disseminate any advertisement that:

1. Includes any untrue statement of a material fact, or omits to state a material fact necessary in order to make the statement made, in the light of the circumstances under which it was made, not misleading; 2. Includes a material statement of fact that the adviser does not have a reasonable basis for believing it will be able to substantiate upon demand by the Commission; 3. Includes information that would reasonably be likely to cause an untrue or misleading implication or inference to be drawn concerning a material fact relating to the investment adviser; 4. Discusses any potential benefits to clients or investors connected with or resulting from the investment adviser's services or methods of operation without providing fair and balanced treatment of any associated material risks or limitations; 5. References specific investment advice provided by the investment adviser that is not presented in a manner that is fair and balanced; 6. Includes or excludes performance results, or presents performance time periods, in a manner that is not fair and balanced; or 7. Is otherwise materially misleading.

(b) Testimonials and endorsements.

Advertisements may include testimonials and endorsements, but only if all of the following conditions are met:

(1) Disclosures.

The advertisement clearly and prominently discloses, or the adviser reasonably believes that the testimonial or endorsement clearly and prominently discloses at the time the testimonial or endorsement is disseminated:

- Whether the person giving the testimonial or endorsement is a current client or investor (testimonial) or is not a current client or investor (endorsement); - That cash or non-cash compensation has been provided for the testimonial or endorsement, if applicable; and - A brief statement of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the investment adviser's relationship with such person.

(2) Oversight and written agreement.

The investment adviser must have a reasonable basis for believing that the testimonial or endorsement complies with the requirements of this section and, if the person giving the testimonial or endorsement is compensated with cash or non-cash compensation in excess of the de minimis threshold ($1,000 over the preceding 12 months), must enter into a written agreement with the person that describes the scope of the agreed-upon activities and the terms of the compensation.

(3) Disqualification.

An investment adviser may not compensate a person, directly or indirectly, for a testimonial or endorsement if the adviser knows, or in the exercise of reasonable care should know, that the person giving the testimonial or endorsement is an "ineligible person" at the time the testimonial or endorsement is disseminated. Ineligibility includes a range of statutorily disqualifying events (e.g., certain convictions, certain disciplinary actions, or other events specified in paragraph (e)(8)).

(c) Third-party ratings.

An advertisement may not include any third-party rating unless:

1. The investment adviser has a reasonable basis for believing that the questionnaire or survey used in the preparation of the third-party rating is structured to make it equally easy for a participant to provide favorable and unfavorable responses and is not designed or prepared to produce any predetermined result; and 2. The advertisement clearly and prominently discloses, or the adviser reasonably believes that the third-party rating clearly and prominently discloses: (i) The date on which the rating was given and the period of time upon which the rating was based; (ii) The identity of the third party that created and tabulated the rating; and (iii) If applicable, that cash or non-cash compensation has been provided by or on behalf of the adviser in connection with obtaining or using the third-party rating.

(d) Performance.

Performance advertisements are subject to extensive substantive requirements:

1. **Gross and net performance.** An advertisement may not present gross performance unless it also presents net performance with at least equal prominence, in a format designed to facilitate comparison, and calculated over the same period using the same methodology. 2. **Prescribed time periods.** An advertisement presenting performance results (other than for a private fund) must include performance for one-, five-, and ten-year periods, each presented with equal prominence and ending on a date no less recent than the most recent calendar year-end. 3. **Related performance.** An advertisement may include "related performance" — the performance of a portfolio or composite managed by the adviser that is sufficiently similar to the services being offered — only if the advertisement includes the performance of all related portfolios, except that the adviser may exclude related portfolios whose exclusion would not result in the advertised performance being materially higher. 4. **Extracted performance.** An advertisement may include extracted performance (the performance of a subset of investments from a single portfolio) only if the advertisement provides, or offers to provide promptly on request, the performance results of the total portfolio from which the performance was extracted. 5. **Hypothetical performance.** An advertisement may not include hypothetical performance (including backtested, projected, model-portfolio, or target returns) unless: (i) The adviser has adopted and implemented policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience; (ii) The adviser provides sufficient information to enable the intended audience to understand the criteria used and assumptions made in calculating the hypothetical performance; and (iii) The adviser provides (or, if the intended audience is an investor in a private fund, offers to provide promptly) the information required for the intended audience to understand the risks and limitations of using such hypothetical performance in making investment decisions. 6. **Predecessor performance.** An advertisement may include performance results from a predecessor adviser only if specified portability conditions are met.

(e) Definitions.

Advertisement.

"Advertisement" means:

1. Any direct or indirect communication an investment adviser makes to more than one person (or to one or more persons if the communication includes hypothetical performance), that offers the investment adviser's investment advisory services with regard to securities to prospective clients or investors in a private fund advised by the investment adviser or offers new investment advisory services with regard to securities to current clients or investors in a private fund advised by the investment adviser; and 2. Any endorsement or testimonial for which an investment adviser provides cash or non-cash compensation directly or indirectly.

The definition excludes extemporaneous, live, oral communications; information contained in a statutory or regulatory notice, filing, or other required communication; and one-on-one communications that do not include hypothetical performance.

Private fund.

Has the meaning in Section 202(a)(29) of the Advisers Act.

(f) Form ADV updates.

Advisers that use advertisements subject to the rule must update their Form ADV, Part 1, Item 5.L to identify the types of performance and compensation-arrangements that appear in their advertisements. Item 5.L data populates IARD and is used by staff for risk assessment.