What Did the SEC Do?
On January 15, 2026, the SEC staff published updated Frequently Asked Questions (FAQs) relating to Rule 206(4)‑1, commonly known as the Marketing Rule under the Investment Advisers Act of 1940. These FAQs clarify and relax certain technical requirements in the rule, giving investment advisers more flexibility in how they present performance figures and use testimonials or endorsements in marketing materials. (McGuireWoods)
The Marketing Rule sets strict standards for advertising and marketing communications by registered investment advisers to ensure information is clear, fair, balanced and not misleading. (McGuireWoods)
Key Changes in the New FAQs
1) Flexibility on Net Performance and Fees
Previous confusion: A footnote in the Marketing Rule’s adopting release led many in the industry to interpret that if actual fees historically charged were lower than the fees an adviser would charge a new client, the adviser must use a model fee when showing “net performance.” (McGuireWoods)
New clarification:
- The SEC staff clarified that this is not a blanket requirement.
- Advisers may present net performance using actual fees even when those fees are lower than the anticipated fees, as long as the advertisement is factually accurate and includes adequate disclosures about the differences. (McGuireWoods)
Why this matters:
This gives advisers practical flexibility in how they illustrate performance for prospective clients, especially when actual fee histories might differ from current pricing structures. It reduces unnecessary reliance on hypothetical “model fees” that can be misleading if not properly explained. (National Law Review)
2) Testimonials and Endorsements from Individuals with Certain Histories
Old constraint: The Marketing Rule generally prohibited advisers from paying for testimonials or endorsements from people with certain “disqualifying events” (e.g., past enforcement actions). (McGuireWoods)
New FAQ guidance:
- If someone has been the subject of a self‑regulatory organization (SRO) final order that did not result in a bar, suspension or prohibition from the securities industry, that person may be compensated for testimonials or endorsements — provided specific conditions are met.
- These conditions include clear disclosures in the advertisement about the SRO order and ensuring the person complies with any terms imposed by the order. (McGuireWoods)
Impact:
This interpretation aligns SEC guidance with how similar enforcement categorizations are treated under federal securities laws and can expand the pool of individuals advisers can work with — though it imposes strict disclosure requirements to protect investors. (McGuireWoods)
Broader Industry Context
How the Marketing Rule Works
The Marketing Rule was adopted to consolidate and modernize longstanding guidance on adviser advertising, including how investment performance must be shown, how testimonials and endorsements are used, and disclosures about conflicts of interest. It broadly requires advisers to include performance net of fees and prohibits misleading claims. (SEC)
Before these new FAQs, some advisers found the rule’s application confusing around model vs. actual fee presentations and whether certain testimonials were permissible — especially when someone had a disciplinary history but no bar or suspension. The new FAQs directly aim at these uncertainties. (McGuireWoods)
Comments and Reactions
Legal and compliance experts:
Many in the legal advisory and compliance community have welcomed the updated guidance as more practical and aligned with real‑world marketing practices. Analysts note that:
- The clarification on fee presentations avoids needless complexity and makes performance advertising more transparent and comparable while upholding investor protection.
- The endorsement flexibility provides advisers with a clearer path to use credible voices in marketing — as long as they disclose relevant regulatory history clearly. This is especially helpful for firms that use industry influencers or former executives in testimonials. (Vigilant LLC)
Industry compliance professionals:
Some compliance officers have said the updates signal the SEC’s intent to be responsive to feedback from advisers about rule application challenges. However, they also emphasize that strict disclosure and clear, prominent presentation of information remains critical — the new flexibility doesn’t reduce advisers’ obligations to provide fair, complete and non‑misleading marketing material. (Vigilant LLC)
Investor protection advocates:
Observers focused on transparency highlight that while the rule relaxations can aid advisers, they still underline the importance of clear labeling and disclosures to ensure investors understand performance figures and the context of testimonials. This balance between flexibility for firms and protection for investors is core to the SEC’s approach. (McGuireWoods)
What This Means in Practice
For Investment Advisers:
More practical options when presenting net performance in ads
Ability to engage certain individuals in compensated endorsements with disclosures
Greater clarity on marketing compliance expectations under the Marketing Rule
For Investors:
Potentially clearer comparability of performance figures
Better transparency around endorsements and testimonials used in adviser marketing
For Compliance Teams:
A need to update policies and procedures in light of new interpretations
Emphasis on documentation and disclosures to support any new marketing approaches
Summary
The SEC’s new Marketing Rule FAQs — effective January 2026 — provide advisers with important clarifications and greater flexibility in key areas:
- Presenting net performance using actual fees, even when model fees were previously thought necessary — based on facts and adequate disclosure. (McGuireWoods)
- Allowing the use of testimonials and endorsements from individuals subject to certain regulatory orders, as long as full disclosures are made and conditions are met. (McGuireWoods)
These developments are part of the SEC’s ongoing effort to make the Marketing Rule workable and effective while maintaining investor protections against misleading advertising. (National Law Review)
Here’s a case‑study and expert comment–focused overview of the SEC’s new FAQs offering greater flexibility under its Investment Adviser Marketing Rule — with real‑world examples of how advisers are responding, where confusion arose, and what industry voices are saying about the changes. These updated FAQs were issued in January 2026 and clarify important points of interpretation under Rule 206(4)‑1 of the Investment Advisers Act. (McGuireWoods)
What the New FAQs Changed
In mid‑January 2026 the SEC staff updated its Marketing Rule FAQ guidance to provide advisers with more flexibility in two key areas:
1. Net Performance Fees — “Model” vs Actual Fees
Before the FAQs, many firms interpreted earlier Marketing Rule guidance as requiring the use of a “model fee” (a hypothetical fee) when showing net performance if the actual fees they historically charged were lower than the fees they intend to charge new clients. This interpretation made performance reporting complex and rigid. (McGuireWoods)
The updated FAQs clarify that:
- Advisers do not have to use a model fee automatically in these situations.
- They may use actual historical fees as long as they make clear disclosures illustrating how the actual fees differ from fees a new investor would pay, and the advertisement is factually accurate overall.
- Whether actual fees can be used depends on all relevant facts and circumstances and adequate disclosures. (McGuireWoods)
2. Testimonials & Endorsements with SRO Disciplinary History
Under the basic Marketing Rule, advisers generally cannot compensate individuals for testimonials or endorsements if the person has a recent “disqualifying event,” such as a suspension or bar in the securities industry. (McGuireWoods)
The new FAQ clarifies that if a person has an SRO (self‑regulatory organization, like FINRA) final order that did not result in suspension or bar, the adviser may compensate that person for testimonials or endorsements if four conditions are met:
- The only reason they are ineligible is the SRO order.
- The order did not expel or suspend them from the industry.
- They comply with any terms of the order (penalties, etc.).
- The advertisement clearly discloses the SRO order — including a link to it — for 10 years after the order date. (McGuireWoods)
This gives advisers more room to work with certain individuals who have past, non‑career‑ending regulatory history — but with robust disclosure requirements. (McGuireWoods)
Case Study 1 — Performance Reporting Clarification
Situation: A boutique RIA (Registered Investment Adviser) historically charged lower fees on older accounts than its current fee schedule for new retail clients. Under earlier interpretations, the firm felt compelled to re‑calculate all historic performance using a model fee to comply — a time‑consuming and technically awkward process.
Application of New FAQ:
With the new FAQ, the firm can now present net performance using the actual fees historically charged, provided it includes a clear disclosure explaining how those fees differ from current ones and illustrates the impact. This avoids the administrative burden of model fee calculations while still giving prospective clients transparent, fair‑balanced performance information. (McGuireWoods)
Why This Matters:
Before the clarification, many compliance officers worried about the rigid reading of the rule. The FAQ’s “facts and circumstances” approach means advisers don’t have to default to model fees automatically, lowering compliance costs and reducing potential misinterpretation. (McGuireWoods)
Case Study 2 — Testimonial Flexibility
Situation: A small investment advisory firm wanted to use a former industry executive — who received an SRO disciplinary order for a procedural matter but was never suspended or barred — in social media endorsements. Under prior practice, that history made the executive ineligible.
Application of New FAQ:
Now the adviser can engage the executive, so long as the advertisement includes a clear disclosure explaining the SRO order and the executive’s compliance with its terms. This makes it possible to leverage respected industry voices while staying compliant. (McGuireWoods)
Industry Comment:
Compliance professionals have noted this change “reinforces that not all regulatory history should be treated as a blanket bar to compensated testimonials”, provided disclosures are prominent and clear — but remind advisers that prominent disclosure is key to avoiding misleading communications. (Vigilant LLC)
Expert & Industry Commentary
Compliance Expert Views
Many in the legal and compliance community see the FAQs as a positive and practical clarification. They signal the SEC staff’s willingness to interpret the Marketing Rule with real‑world business practices in mind while still upholding its anti‑fraud and transparency principles. The focus on facts and circumstances — rather than rigid formulas — helps firms adapt to diverse fee structures and marketing activities. (Vigilant LLC)
One compliance director summed it up:
“This shows the SEC staff is listening to advisers’ concerns about implementation challenges — particularly around performance disclosures and testimonial restrictions.” (Vigilant LLC)
Investor Protection Perspective
Investor advocates emphasize that while the FAQs offer flexibility, advisers must not diminish transparency. Clear, prominent disclosures — especially around fees and regulatory history — are essential to ensuring potential clients aren’t misled by performance figures or endorsements. The rule’s anti‑fraud core remains unchanged. (Wipfli)
Why This Matters in Practice
Advisers often struggle with the Marketing Rule’s detailed requirements, especially in these areas:
- Net vs. gross performance: Determining how to reflect fees fairly in advertisements.
- Testimonials and endorsements: Ensuring compensation arrangements and past histories are fully disclosed.
- Ad enforcement risk: Firms have faced enforcement actions for failing to include required disclosures or for untrue or misleading claims. (Global Relay)
The updated FAQs aim to reduce confusion and give advisers operational clarity while maintaining investor protections through transparency and disclosures.
Summary
| Topic | What the FAQ Changes |
|---|---|
| Net Performance Fees | Advisers can use actual fees (not only model fees) when clearly disclosed and factually accurate. (McGuireWoods) |
| Testimonials/Endorsements | Firms may compensate individuals with SRO orders that didn’t lead to suspension/bar, if disclosures are clear and prominent. (McGuireWoods) |
Final Notes
The updated SEC Marketing Rule FAQs demonstrate a practical shift toward flexibility in applying complex advertising requirements — but with transparency and clear disclosure still central. Firms should still prioritize strong compliance systems to back up advertising claims and disclosures when using these relaxed interpretations. (McGuireWoods)