SEC Reinforces Ban on Testimonial Marketing for Investment Advisers

In March 2014 the Securities and Exchange Commission (the “SEC”) issued guidance on the use by investment advisers and investment advisory representatives (together, “IAs”) in their marketing of testimonials (but not objective third-party articles) posted on social media.  Under Section 206(4) of the Investment Advisers Act (prohibiting fraudulent, deceptive or manipulative acts) and Rule 206(4)-1(a)(1) (finding testimonials in advertisements “misleading”),  In July 2018, the SEC announced several settlements with IAs that reinforced this guidance. Four of the settlements (1, 2, 3, 4) involved solicitation by the IA through a marketing firm of testimonials.  The fifth settlement involved videos posted by a joint IA and broker-dealer providing customer testimonials posted on its website.