Quick Answer
Advisers owe full and fair disclosure of all material facts (broker-dealers follow a narrower antifraud standard). Registration is never endorsement, guaranteeing against loss is always prohibited, and the required advisory-contract terms must be written with no assignment absent client consent. The SEC Marketing Rule now permits testimonials and endorsements with heavy disclosure.
One sheet: disclosure timing, registration-is-not-approval, the loss-guarantee ban, contract and assignment rules, and the advertising framework.
Which One-Liners Win Points?
- Omitting a material fact carries the same legal weight as a false statement: silence can be fraud.
Which Numbers Matter Most?
| Item | Value |
|---|---|
| Initial brochure delivery | At least 48 hours before contracting, OR at signing with a 5-business-day free-look right |
| Annual ADV amendment filed with regulators | Within 90 days of fiscal year-end |
| Annual brochure, SEC-registered | Within 120 days of fiscal year-end (full brochure+summary, OR just a summary+offer), and skippable if no material changes |
| Annual brochure, state-registered | The same 120-day clock, the same two paths, the same no-material-changes relief |
| Form ADV Part 2A required disclosure items | 18 core items, plus Item 19 for state-registered advisers |
| Disciplinary-event 10-year lookback | a presumption of materiality, not a hard cutoff; an older event still gets disclosed if it is material |
| Assignment trigger | Transfer of the contract or a controlling block of voting securities; control means controlling influence over management/policy, presumed above 25% |
| Performance-fee qualified client, assets under management with the adviser | $1.4 million or more |
| Performance-fee qualified client, net worth | More than $2.7 million (excludes primary residence) |
| Qualified client, written disclosure required | the risk-taking incentive, whether unrealized gains count, the measurement periods, the comparative index, and hard-to-value asset valuation |
| Qualified-client threshold inflation adjustment | Every 5 years |
| Fulcrum-fee "other client" asset threshold | More than $1 million under the contract |
| BDC performance-fee cap | Up to 20% of realized net capital gains |
| Written promoter agreement de minimis exception | $1,000 or less (or an affiliate) |
| SEC Marketing Rule effective date | November 4, 2022; replaced the former advertising and solicitation rules |
| Marketing performance-period requirement | 1-, 5-, and 10-year periods, equal prominence |
| Marketing materials retention | At least 5 years from end of fiscal year of last use |
| First-two-years storage location | An "appropriate office" (not necessarily the principal office) |
Which Gotchas Trip Students Up?
- "Testimonials are prohibited" is the old rule. If you see it as an answer choice, it no longer applies.
- "Series 66 certified" is wrong. Series 66 is a license, not a certification: say "licensed."
What Must an Adviser Disclose?
- Form ADV Part 2A is the primary disclosure document, delivered 48 hours before contracting or at signing with a 5-business-day free look.
- Annual delivery does not split by regime. State- and SEC-registered advisers share the 120-day clock, the same two paths, and the same no-material-changes relief. Only the initial delivery rule is state-only.
What May You Say About Your Registration?
- Stating your status accurately is lawful. Implying a regulator found you competent, endorsed you, or approved your qualifications is not, and neither is using
RIAorIARas though it were an earned credential.
What Can You Promise a Client?
- Never a guarantee against loss or a specific return, from an adviser, representative, broker-dealer, or agent. Profit/loss sharing in a customer's account needs written authorization from both the customer and the firm.
What Must an Advisory Contract Contain?
- Performance-based fees are generally prohibited, permitted only for qualified clients ($1.4M+ AUM, $2.7M+ net worth, a qualified purchaser, or certain adviser insiders/employees), and the fee may share in gains only.
- The symmetrical fulcrum fee (rising for outperformance, falling for underperformance against a benchmark) applies to a registered investment company OR any other client with more than $1 million under contract. A separate exception lets a business development company charge up to 20% of net realized gains.
- A partnership membership change counts as an assignment, needing client consent, unless only a minority of members holding only a minority interest changes (clients stay notified). The NASAA model rule sets this and other contract terms, like fees and discretionary authority, in writing.
Which Advertising Rules Apply?
- Performance ads (other than private funds) need 1-, 5-, and 10-year periods at equal prominence. Cherry-picking periods and showing gross performance without equally prominent net are prohibited.
- Related performance must include all related portfolios (narrow exception), and extracted performance must offer the total portfolio's results too.
- Predecessor performance needs the same people managing similar accounts at the new firm, all similar accounts included absent a narrow exception, and clear disclosure the results are from another entity.
One-Breath Recap
Advisers owe full and fair disclosure of every material fact as a fiduciary duty; broker-dealers follow the antifraud standard, and an omission is as fraudulent as a lie. Registration is a filing, never an endorsement or a finding of competence, so stating your status is fine but implying a regulator vouched for you is a violation. You can never guarantee against loss, though profit/loss sharing needs written authorization from both the customer and the broker-dealer. Qualified clients may be charged a gains-only performance fee, and contract terms must be written with no assignment absent consent (a minority partnership change is the exception). Advertising is fair, balanced, and not misleading; testimonials need heavy disclosure and written promoter agreements; performance ads need 1-, 5-, and 10-year periods; marketing records live five years, the first two on-site.
Need more than the recap? Read the full Client Communication unit.