Correspondence and Advertising

With the contractual framework established, the final piece covers how advisers communicate with the public. The SEC's Marketing Rule fundamentally changed advertising rules in 2022, and the exam tests the new framework heavily.

What Standards Apply to All Communications?

Communications by investment advisers and broker-dealers must meet these general standards:

• Fair, balanced, and not misleading
• Must have a reasonable basis for any claims or recommendations
• Cannot make false or misleading statements of material fact
• Must disclose material risks alongside potential benefits

These apply to every form of communication: letters, emails, presentations, social media posts, website content, and formal advertisements. But the specific rule that enforces them differs by actor: the SEC Marketing Rule below is an adviser-advertisement standard; broker-dealers are separately held to a dishonest/unethical-practices standard prohibiting deceptive advertising, with their own recommendation-specific duties, not the identical Marketing Rule conditions.

Can the Administrator Require Advertising to Be Filed With the State?

Yes. This is a state power, separate from the federal Marketing Rule, and it is easy to overlook because the rest of this lesson is federal.

• By rule or order, the Administrator may require sales literature and advertising addressed to prospective investors, including prospective advisory clients, to be filed with the state
• The requirement does not reach a communication where the security or the transaction is exempt, or where the security is federal covered

Think of it this way: the state can ask to see the marketing for what it regulates. Where its registration authority stops, so does its filing power.

Exam Tip: Gotchas

• The Administrator's filing power is a state authority, not part of the Marketing Rule. A question about filing advertising with the Administrator is testing state law, even when the firm is an investment adviser.
• Exempt securities, exempt transactions, and federal covered securities are carved out. The carve-out tracks the same boundary as state registration authority.

What Does the SEC Marketing Rule Require?

The Marketing Rule replaced the former advertising and solicitation rules, effective November 4, 2022. It modernized how investment advisers can market their services.

What Counts as an "Advertisement"?

The rule defines "advertisement" broadly to include:

1. Client-facing communications: Any communication that offers or promotes advisory services (with limited exceptions for one-on-one communications)
2. Compensated third-party endorsements and testimonials: Any paid promotion by someone outside the firm

What's Now Permitted, With Conditions?

What's Still Prohibited?

• Untrue statements of material fact
• Unsubstantiated claims: any claim without a reasonable basis
• Cherry-picking favorable time periods for performance data
• Failing to present performance fairly (e.g., showing only the best-performing accounts)
• Showing gross performance without also showing net performance (net must be equally or more prominent)
• Showing portfolio or composite performance (for anything other than a private fund) without the same portfolio's one-, five-, and ten-year performance, each with equal prominence, ending no less recently than the most recent calendar year-end (substituting the portfolio's full life if it's younger)
• Showing extracted performance (a carved-out slice of a portfolio) without providing, or offering to promptly provide, the total portfolio's performance
• Using predecessor performance without meeting its conditions (same people managing similar accounts at the new firm, all similar accounts included unless excluding one wouldn't raise the results, and clear disclosure that the results are from another entity)

What Must Advisers Disclose About Promoters?

When using testimonials or endorsements, the adviser must:

• Disclose whether the promoter is compensated
• Disclose material conflicts of interest
• Disclose whether the promoter is a client
• Enter into a written agreement with promoters (unless the promoter is an affiliate or receives $1,000 or less)
• Oversee the promoter's compliance with the Marketing Rule
• Not compensate a promoter who is an "ineligible person" under the Marketing Rule's own definition: someone subject to a disqualifying SEC action or a listed disqualifying event (specified felony/misdemeanor convictions, SEC/SRO bars, and similar) within the past 10 years, if the adviser knows or should know it
• Note that this is the Marketing Rule's own disqualification test. A person covered by the separate Regulation D private-placement "bad actor" disqualification provision is only exempted from having to check this test for that specific private offering, not automatically defined as ineligible because of that Reg D status

What Restricts Hypothetical Performance?

• The adviser must have policies and procedures reasonably designed to ensure the hypothetical performance is relevant to the likely financial situation and investment objectives of the advertisement's intended audience (there is no separate categorical ban on showing it to retail or mass audiences)
• Must include the methodology used to create the hypothetical, sufficient for the audience to understand the criteria and assumptions
• Must disclose the risks and limitations of using hypothetical performance in making investment decisions
• Must explain that hypothetical results have inherent limitations and may not reflect actual trading

Exam Tip: Gotchas

• Testimonials and endorsements are now PERMITTED. Before November 2022, they were prohibited. The exam tests the new rule: they are allowed, but with extensive disclosure and compliance requirements.
• "Testimonials are prohibited" is the old rule. If you see that as an answer choice, it no longer applies.
• Hypothetical performance has no flat retail/mass-audience ban. The actual test is whether the adviser has policies reasonably designed to keep it relevant to the intended audience, plus adequate disclosure of methodology, assumptions, risks, and limitations.
• Net performance must appear alongside gross performance. Net must be equally or more prominent; showing gross alone is prohibited.
• Written agreement required with paid promoters. The only exceptions: affiliates or de minimis compensation ($1,000 or less).

Are Registration Abbreviations Like RIA or IAR Professional Designations?

RIA (Registered Investment Adviser) and IAR (Investment Adviser Representative) describe a registration status, not an earned credential. An accurate, plain statement of registration status is lawful (for example, "I am registered as an investment adviser representative in this state"). What's prohibited is presenting the registration as if it were a professional designation or a mark of approved competence, such as listing "RIA" or "IAR" after your name on a business card or letterhead the way you would list an earned credential, or otherwise implying the registration reflects a regulator's endorsement. The same applies to an agent registration: accurate registration statements are fine; presenting registration as approval or a credential is not.

Genuine professional designations such as CFA (Chartered Financial Analyst) and CFP (Certified Financial Planner) are earned by meeting an independent certifying body's exam, ethics, and experience requirements. Because they reflect a real qualification process rather than a state filing, they are permitted in advertising.

Think of it this way: Registration tells you someone filed the right paperwork. A designation tells you they passed an independent body's exam and met its ongoing standards. Stating your registration status accurately in a sentence is fine; presenting the registration abbreviation as if it were a credential is the violation.

The same distinction applies to the Series 66 exam itself (and Series 63/65). Passing it is a licensing qualification, administered by FINRA on behalf of state securities regulators, not a certification issued by an independent certifying body the way CFA and CFP are. Accurate phrasing is "Series 66 licensed" or "holds a Series 66 license." Calling it "Series 66 certified" misrepresents a licensing exam as an earned certification.

Exam Tip: Gotchas

• Accurately stating your registration status is always lawful. What's prohibited is presenting "RIA" or "IAR" as a credential (e.g., tacked after your name like a designation), since these are registration categories, not earned designations.
• Earned designations (CFA, CFP, and similar) remain permitted because they represent a real, independently verified qualification, unlike a registration status.
• "Series 66 certified" is inaccurate. Series 66 is a license, not a certification: say "licensed," not "certified."

Do Different Rules Apply to Social Media?

• All social media activity by advisers and agents is subject to the same regulatory requirements as any other advertisement or correspondence
• Social media posts must be supervised, archived, and compliant with advertising rules
• "Likes," "shares," and endorsements on social media may constitute testimonials subject to disclosure requirements
• Interactive content (forums, live chats) may be treated differently from static posts, depending on the medium

Key principle: The medium does not change the rules. The same standards apply whether you are posting on LinkedIn, sending a newsletter, or running a TV commercial.

Exam Tip: Gotchas

• Social media follows the same advertising rules. There is no separate, lighter standard for social media posts. A LinkedIn post is regulated just like a print advertisement.

How Are Email and Messaging Treated?

The content decides the rule, not the channel. An email that offers advisory services or promotes the adviser is an advertisement and must meet the Marketing Rule's conditions. Routine service email (a meeting confirmation, a statement question) is correspondence. Both are business communications, and both must be supervised and retained.

The same standard prohibitions apply with full force in an email as in a brochure: no guarantee against loss, no performance guarantee, no untrue or misleading statement, and no suggestion that registration implies approval.

Does Using a Personal Phone or App Change Anything?

No. A business communication sent through a personal account, a texting app, or any other messaging platform is still a record. Choosing an unarchived channel does not move the message outside the retention requirement. It only means the firm has failed to capture a record it was already required to keep.

Because the firm must be able to retain and produce these communications, the practical compliance answer is to prohibit channels the firm cannot archive.

Think of it this way: the recordkeeping obligation attaches to the message, not to the device. Sending firm business from a personal phone does not make it personal.

Exam Tip: Gotchas

• An off-channel business text is a recordkeeping failure, not an exempt communication. The message is still a required record. This is a frequent enforcement theme and a favourite exam scenario.
• Whether an email is an advertisement turns on what it says. Promoting the adviser makes it an advertisement; answering a service question makes it correspondence.

What Rules Apply to a Firm's Website?

A public website is available to anyone, so it is an advertisement, and it must satisfy the advertising rules of the state where it is read as well as the state where it is published.

• Testimonials and endorsements appearing on the site fall under the Marketing Rule's disclosure and oversight requirements, exactly as they do on social media
• Linking to third-party material can adopt that material as the firm's own. This is the usual trap: a favourable article linked from the firm's site can become the firm's own claim, with the firm answerable for it

What Is the Internet Adviser Exemption?

An internet adviser relying on the federal internet-adviser exemption must provide its advice through an interactive website. This is a narrow condition for registering with the SEC rather than the states. It is not a general licence to advertise across state lines.

Exam Tip: Gotchas

• A website must satisfy the rules where it is read, not only where it is published. A site reachable from every state is advertising in every state.
• A link can become an endorsement. Linking to third-party material risks adopting it as the firm's own statement.
• The internet-adviser exemption is a registration route, not an advertising permission. It requires an interactive website and does not license cross-border marketing.

How Long Must Marketing Records Be Kept?

All marketing materials and communications must be preserved:

Exam Tip: Gotchas

• 5 years total, 2 years in an "appropriate office," not necessarily the principal office. "Principal office" storage is a separate requirement that applies to corporate/partnership organizational documents, a different recordkeeping category.

What Should You Check on Exam Day?

• Can you state the general communication standard (fair, balanced, not misleading, reasonable basis, material risks disclosed)?
• Do you know when the Marketing Rule took effect (November 4, 2022), what it replaced, and that testimonials and endorsements are now permitted with disclosure of compensation, conflicts, and client status?
• Can you list what's still prohibited (untrue statements, unsubstantiated claims, cherry-picking, unfair performance presentation, gross performance shown without net, missing 1/5/10-year periods, incomplete related-performance/extracted-performance/predecessor-performance disclosures)?
• Can you explain why RIA and IAR can be stated accurately but not used like a credential, while CFA and CFP can be used either way, and why "Series 66 certified" is inaccurate phrasing?
• Can you state the recordkeeping retention rule: at least 5 years, with the first 2 years in an "appropriate office," not necessarily the principal office?