On December 16, 2025, the SEC Division of Examinations released a Risk Alert containing observations regarding investment advisers’ compliance with Rule 206(4)-1 (the “Marketing Rule”). The Division provides risk alerts to inform and remind investment advisers and their stakeholders of advisers’ compliance requirements. Regarding third-party ratings in investment advisers’ advertisements, the Division noted that it has observed common deficiencies regarding compliance with the requirements relating to due diligence and disclosures.
The Marketing Rule prohibits the use of third-party ratings in advertisements unless the adviser has a reasonable basis for believing that any questionnaire or survey used in the preparation of the third-party ratings meet certain criteria, and that either the rating or the adviser discloses certain information related to the ratings.
The Division staff found that advisers used several methods to show that the third-party ratings in their advertisements complied with the due diligence requirement. The Risk Alert gave examples of (1) reviewing publicly disclosed information about the methodologies of the third-party surveys; (2) retrieving any surveys used in the rating’s creation; and (3) seeking the rating agencies’ disclosures of the surveys’ design, structure, and administration.
The Commission also found, however, several advisers who failed the due diligence requirement. According to the Risk Alert, these advisers had failed to (1) develop policies and procedures for satisfying the due diligence requirement or (2) otherwise take steps to meet said requirement, such as reviewing surveys used in ratings preparation.
Commission staff also found several advisers who used third-party ratings in their advertisements without making sufficient clear and prominent disclosures, as required. The Risk Alert gave the following examples:
(1) Advisers whose advertisements linked to third-party websites containing ratings of the advisers without the required disclosures.
(2) Advisers whose advertisements included third-party ratings without clearly and prominently displaying the date on which the ratings were given and the time period upon which they were based. The Risk Alert highlighted cases where the third-party ratings referenced a range of years when the adviser received said rating, while the adviser listed years in which the rating was not received.
(3) Advisers whose advertisements contained third-party rating logos but did not clearly and prominently identify the third party that created the ratings.
(4) Advisers that paid, directly or indirectly, for the third-party ratings without properly disclosing such. The Risk Alert gave examples of advisers who paid third-party agencies for ratings but reprinted or linked to the third-party rating without disclosing the payments. Specifically, advisers did not disclose that payments were made for “(1) the use of the third-party rating providers’ logos or reprints of the ratings; and (2) the advisers’ priority placement in the third-party providers’ advertisements or for upgraded or enhanced exposure.” Advisers also failed to disclose payments for referrals through the third-party agencies’ linked websites.
(5) Advisers that had paid to be considered by third-party agencies but failed to disclose said payments in advertisements using the third-party ratings.
(6) Advisers who failed to make their required disclosures in a clear and prominent manner. The Risk Alert gave examples of advisers who used hyperlinks, used smaller fonts, or placed disclosures out of context from the ratings.
The various observations and examples given in the Risk Alert highlight the importance of full compliance with the SEC Marketing Rule.
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