# Investment Adviser Marketing — Adopting Release IA-5653 (Dec. 22, 2020)

- **Primary source (archived PDF):** [`sec-marketing-rule-release-ia-5653.pdf`](./sec-marketing-rule-release-ia-5653.pdf)
- **Source URL:** https://www.sec.gov/rules/final/2020/ia-5653.pdf
- **Pinpoint cite:** Investment Adviser Marketing, Investment Advisers Act Release No. IA-5653, File No. S7-21-19 (Dec. 22, 2020) (final rule adopting amended rule 206(4)-1 under the Advisers Act; conformed-to-Federal-Register version, 430 pp.). Effective May 4, 2021.
- **Retrieved-date:** UNKNOWN (do not fabricate)
- **Status:** primary-archived (430-page PDF, verified via text extraction as the real adopting release — title page reads "Release No. IA-5653; File No. S7-21-19," "Investment Adviser Marketing," "ACTION: Final rule" — not a nav shell or bot challenge)

## Why it matters for the creator platform

This is the adopting release for the merged **Marketing Rule, 17 CFR 275.206(4)-1**, which replaced the old cash-solicitation rule (206(4)-3). It is the load-bearing federal source on **paying a CREATOR to endorse/solicit for an adviser or its private fund**. Two things bear directly on the creator-platform structure:

1. The rule's **compensated-endorsement stack** — required disclosures (cash/non-cash comp + material conflicts, clear and prominent), a written agreement, adviser oversight, and an **ineligible-person (bad-actor) disqualification** — is exactly the compliance regime that attaches when a creator is paid (cash or non-cash) to promote/solicit for the adviser.
2. The Commission's **express note that a paid promoter "may also be acting as a broker or dealer within the meaning of section 3(a)(4) or 3(a)(5) of the Exchange Act"** and must determine whether it has to register under Exchange Act §15(a). This is the Marketing-Rule counterpart to the *Ranieri* transaction-based-comp problem: satisfying the Marketing Rule does NOT cure a broker-registration violation. The SEC declined to re-adopt the 1979 no-registration position for solicitors.

## Key sections flagged

### The "promoter may be acting as a broker-dealer" note — Section II.C.5.e (pp. 55–56)
> "A promoter may, depending on the facts and circumstances, be acting as an investment adviser within the meaning of section 202(a)(11) of the Act. ... A promoter also may be acting as a broker or dealer within the meaning of section 3(a)(4) or 3(a)(5) of the Exchange Act, for example, when soliciting investors for, or referring investors to, an adviser or a private fund advised by the adviser. Any promoter must determine whether it is subject to statutory or regulatory requirements under Federal law, including the requirement to register as an investment adviser pursuant to the Act and/or as a broker-dealer pursuant to section 15(a) of the Exchange Act, respectively."

> "To be clear, we are not making a presumption that a person providing an endorsement or testimonial meets the definition of investment adviser or broker-dealer and must register under the Act or the Exchange Act, respectively. Nor are we making a presumption that such person may or may not be an associated person of a registered investment adviser."

### Withdrawal of the 1979 no-registration position for solicitors — Section II.C.5.e (p. 55)
> "We proposed to withdraw our position that a solicitor who engages in solicitation activities in accordance with paragraph (a)(2)(iii) of the cash solicitation rule will be, at least with respect to those activities, an associated person of an investment adviser and therefore will not be required to register individually under the Advisers Act solely as a result of those activities (the '1979 position'). ... Although the 1979 position will no longer apply upon the rescission of the current solicitation rule, we are not adopting a similar position with respect to endorsements and testimonials under the final marketing rule."

### Supervised-person carve-out (when the creator is inside the adviser) — Section II.C.5.e (p. 56)
> "If the promoter is a supervised person of the adviser for which it is providing a testimonial or endorsement, the promoter does not need to separately register with the Commission as an investment adviser solely as a result of his or her activities as a promoter."

### Operative rule — the compensated-endorsement stack — final rule 206(4)-1(b) (pp. 405–408)
> "(b) Testimonials and endorsements. An advertisement may not include any testimonial or endorsement, and an adviser may not provide compensation, directly or indirectly, for a testimonial or endorsement, unless the investment adviser complies with the conditions in paragraphs (b)(1) through (3) of this section, subject to the exemptions in paragraph (b)(4) of this section."

**(b)(1) Required disclosures** — rule 206(4)-1(b)(1):
> "(1) Required disclosures. The investment adviser discloses, or reasonably believes that the person giving the testimonial or endorsement discloses, the following at the time the testimonial or endorsement is disseminated: (i) Clearly and prominently: (A) That the testimonial was given by a current client or investor, and the endorsement was given by a person other than a current client or investor, as applicable; (B) That cash or non-cash compensation was provided for the testimonial or endorsement, if applicable; and (C) A brief statement of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the investment adviser's relationship with such person; (ii) The material terms of any compensation arrangement, including a description of the compensation provided or to be provided, directly or indirectly, to the person for the testimonial or endorsement; and (iii) A description of any material conflicts of interest on the part of the person giving the testimonial or endorsement resulting from the investment adviser's relationship with such person and/or any compensation arrangement."

**(b)(2) Adviser oversight and compliance (written agreement)** — rule 206(4)-1(b)(2):
> "(2) Adviser oversight and compliance. The investment adviser must have: (i) A reasonable basis for believing that the testimonial or endorsement complies with the requirements of this section, and (ii) A written agreement with any person giving a testimonial or endorsement that describes the scope of the agreed-upon activities and the terms of compensation for those activities."

**(b)(3) Disqualification (ineligible person / bad actor)** — rule 206(4)-1(b)(3):
> "(3) Disqualification. An investment adviser may not compensate a person, directly or indirectly, for a testimonial or endorsement if the adviser knows, or in the exercise of reasonable care should know, that the person giving the testimonial or endorsement is an ineligible person at the time the testimonial or endorsement is disseminated. ..."

**(b)(4) Exemptions — de minimis, affiliate, and registered BD** — rule 206(4)-1(b)(4):
> "(4) Exemptions. (i) A testimonial or endorsement disseminated for no compensation or de minimis compensation is not required to comply with paragraphs (b)(2)(ii) and (3) of this section; (ii) A testimonial or endorsement by the investment adviser's partners, officers, directors, or employees, or a person that controls, is controlled by, or is under common control with the investment adviser ... is not required to comply with paragraphs (b)(1) and (2)(ii) of this section, provided that the affiliation ... is readily apparent to or is disclosed to the client or investor ...; (iii) A testimonial or endorsement by a broker or dealer registered with the Commission under section 15(b) of the Securities Exchange Act of 1934 ... is not required to comply with: (A) Paragraph (b)(1) ... if the testimonial or endorsement is a recommendation subject to § 240.15l-1 (Regulation Best Interest) ...; (B) Paragraphs (b)(1)(ii) and (iii) ... if the testimonial or endorsement is provided to a person that is not a retail customer ...; and (C) Paragraph (b)(3) ... if the broker or dealer is not subject to statutory disqualification, as defined under section 3(a)(39) of that Act ..."

### De minimis threshold — $1,000 / preceding 12 months — final rule 206(4)-1(e)(2) (p. 412)
> "(2) De minimis compensation means compensation paid to a person for providing a testimonial or endorsement of a total of $1,000 or less (or the equivalent value in non-cash compensation) during the preceding 12 months."

### "Ineligible person" definition (the bad-actor stack) — final rule 206(4)-1(e)(9) (p. 416)
> "(9) Ineligible person means a person who is subject to a disqualifying Commission action or is subject to any disqualifying event, and the following persons with respect to the ineligible person: (i) Any employee, officer, or director of the ineligible person and any other individuals with similar status or functions within the scope of association with the ineligible person; (ii) If the ineligible person is a partnership, all general partners; and (iii) If the ineligible person is a limited liability company managed by elected managers, all elected managers."

### "Endorsement" and "Testimonial" definitions — final rule 206(4)-1(e)(5) & (e)(17) (pp. 414, 417)
> "(5) Endorsement means any statement by a person other than a current client or investor in a private fund advised by the investment adviser that: (i) Indicates approval, support, or recommendation of the investment adviser or its supervised persons or describes that person's experience with the investment adviser or its supervised persons; (ii) Directly or indirectly solicits any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser; or (iii) Refers any current or prospective client or investor to be a client of, or an investor in a private fund advised by, the investment adviser."

> "(17) Testimonial means any statement by a current client or investor in a private fund advised by the investment adviser: (i) About the client or investor's experience with the investment adviser or its supervised persons; (ii) That directly or indirectly solicits any current or prospective client or investor ...; or (iii) That refers any current or prospective client or investor ..."