IM Guidance Update

M a rch 2014 | No. 2014- 0 4

US Securities and Exchange Commission

Division of Investment Management

GUIDANCE ON THE TESTIMONIAL RULE AND SOCIAL MEDIA

From time to time, we have been asked questions concerning the nature, scope and 

application of the rule that prohibits investment advisers from using testimonials in their 

advertisements. In addition, in the past several years, we have been asked a number of 

questions concerning investment advisers’ use of social media. We are now providing 

this guidance concerning registered investment advisers’ use of social media and their 

publication1

 of advertisements that feature public commentary about them that appears 

on independent, third-party social media sites.2

We understand that use of social media has increased the demand by consumers for 

independent, third-party commentary or review of any manner of service providers, 

including investment advisers. We recognize that social media has facilitated consumers’ 

ability to research and conduct their own due diligence on current or prospective service providers. Through this guidance, we seek to clarify application of the testimonial 

rule as it relates to the dissemination of genuine third-party commentary that could be 

useful to consumers. 

Specifically, we seek through this guidance to assist firms in applying section 206(4) of 

the Investment Advisers Act of 1940 (“Advisers Act”) and rule 206(4)-1(a)(1) thereunder 

(“testimonial rule”) to their use of social media.3 The guidance, in the form of questions 

and answers, also seeks to assist investment advisers in developing compliance policies 

and procedures reasonably designed to address participation in this evolving technology, 

specifically with respect to the publication of any public commentary that is a testimonial. 

Consistent with previous staff guidance, we believe that in certain circumstances, as 

described below, an investment adviser’s or investment advisory representative’s 

(“IAR’s”) publication of all of the testimonials about the investment adviser or IAR from 

an independent social media site on the investment adviser’s or IAR’s own social media 

site or website would not implicate the concern underlying the testimonial rule.4

Effective November 4, 2022, This Letter is Withdrawn. Please consult the following web page for more 

information: https://www.sec.gov/divisions/investment/im-modified-withdrawn-staff-statements
IM GUIDANCE UPDATE 2

BACKGROUND

Section 206(4) generally prohibits any investment adviser from engaging in any act, 

practice or course of business that the Commission, by rule, defines as fraudulent, 

deceptive or manipulative. In particular, rule 206(4)-1(a)(1) states that:

[i]t shall constitute a fraudulent, deceptive, or manipulative act, practice, or 

course of business . . . for any investment adviser registered or required to be 

registered under [the Advisers Act], directly or indirectly, to publish, circulate, 

or distribute any advertisement which refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, 

analysis, report or other service rendered by such investment adviser.

Rule 206(4)-1(a)(1) was designed to address the nature of testimonials when used in 

investment advisory advertisements. When it adopted the rule, the Commission stated 

that, in the context of investment advisers, it found “. . . such advertisements are misleading; by their very nature they emphasize the comments and activities favorable to 

the investment adviser and ignore those which are unfavorable.”5 The staff has stated 

that the rule forbids the use of a testimonial by an investment adviser in advertisements 

“because the testimonial may give rise to a fraudulent or deceptive implication, or 

mistaken inference, that the experience of the person giving the testimonial is typical 

of the experience of the adviser’s clients.”6

Whether public commentary on a social media site is a testimonial depends upon all 

of the facts and circumstances relating to the statement. The term “testimonial” is not 

defined in the rule, but the staff has consistently interpreted that term to include a 

“statement of a client’s experience with, or endorsement of, an investment adviser.”7

Depending on the facts and circumstances, public commentary made directly by a 

client about his or her own experience with, or endorsement of, an investment adviser 

or a statement made by a third party about a client’s experience with, or endorsement 

of, an investment adviser may be a testimonial.8

The staff also has stated that an investment adviser’s publication of an article by an 

unbiased third party regarding the adviser’s investment performance is not a testimonial, unless it includes a statement of a client’s experience with or endorsement of 

the adviser.9 The staff also has stated that an adviser’s advertisement that includes a 

partial client list that does no more than identify certain clients of the adviser cannot be 

viewed either as a statement of a client’s experience with, or endorsement of, the adviser and therefore is not a testimonial.10 Such an advertisement could nonetheless violate 

section 206(4) and rule 206(4)-1(a)(5) if the advertisement is false or misleading.11
IM GUIDANCE UPDATE 3

The staff no longer takes the position, as it did a number of years ago, that an advertisement that contains non-investment related commentary regarding an IAR, such as 

regarding an IAR’s religious affiliation or community service, may be deemed a testimonial violative of rule 206(4)-1(a)(1).12

The following questions and answers are intended to provide more guidance.

Third-party commentary

Q1. May an investment adviser or IAR publish public commentary that is an explicit or 

implicit statement of a client’s experience with or endorsement of the investment 

adviser or IAR on the investment adviser’s or IAR’s social media site? 

A1. Generally, staff believes that such public commentary would be a testimonial within 

the meaning of rule 206(4)-1(a)(1) and its use in an advertisement by an investment 

adviser or IAR would therefore be prohibited.

•	 For example, if an investment adviser or IAR invited clients to post such public 

commentary directly on the investment adviser’s own internet site, blog or 

social media site that served as an advertisement for the investment adviser 

or IAR’s advisory services, such testimonials would not be permissible.

Q2. May an investment adviser or IAR publish the same public commentary on its own 

internet or social media site if it comes from an independent social media site? 

A2. When an investment adviser or IAR has no ability to affect which public commentary is included or how the public commentary is presented on an independent 

social media site; where the commentators’ ability to include the public commentary is not restricted;13 and where the independent social media site allows for the 

viewing of all public commentary and updating of new commentary on a real-time 

basis, the concerns underlying the testimonial prohibition may not be implicated.

As described in more depth below, publication of public commentary from an independent social media site would not raise any of the dangers that rule 206(4)-1(a)

(1) was designed to prevent if: 

•	 the independent social media site provides content that is independent of the 

investment adviser or IAR; 

•	 there is no material connection between the independent social media site and 

the investment adviser or IAR that would call into question the independence 

of the independent social media site or commentary; and 
IM GUIDANCE UPDATE 4

•	 the investment adviser or IAR publishes all of the unedited comments 

appearing on the independent social media site regarding the investment 

adviser or IAR.14

Under these circumstances, an investment adviser or IAR may include such public 

commentary in an advertisement without implicating the concerns underlying the 

testimonial rule.

If, however, the investment adviser or IAR drafts or submits commentary that is 

included on the independent social media site, the testimonial rule generally would 

be implicated. Also, if the investment adviser or IAR is allowed to suppress the 

publication of all or a portion of the commentary, edit the commentary or is able to 

organize or prioritize the order in which the commentary is presented, the testimonial rule generally would be implicated.

Q3. What content is not independent of an investment adviser or IAR and what is 

a material connection that would call into question the independence of a site 

or commentary?

A3. Commentary would not be independent of an investment adviser or IAR if the 

investment adviser or IAR directly or indirectly authored the commentary on the 

independent social media site, whether in their own name, a third party’s name, or 

an alias, assumed or screen name.

An investment adviser or IAR would have a material connection with a site or commentary that would call into question the independence of the site or commentary 

if, for example, the investment adviser or IAR: (1) compensated a social media user 

for authoring the commentary, including with any product or service of value; or (2) 

prioritized, removed or edited the commentary.15

•	 For example, an investment adviser could not have a supervised person 

submit testimonials about the investment adviser on an independent social 

media site and use such testimonials in advertisements without implicating 

the testimonial rule. 

•	 An investment adviser or IAR could not compensate a client or prospective 

client (including with discounts or offers of free services) to post commentary 

on an independent social media site and use such testimonials in 

advertisements without implicating the testimonial rule. 

Q4. May an investment adviser or IAR publish testimonials from an independent social 

media site in a way that allows social media users to sort the criteria? 
IM GUIDANCE UPDATE 5

A4. An investment adviser or IAR’s publication of testimonials from an independent 

social media site that directly or indirectly emphasizes commentary favorable to the 

investment adviser or IAR or de-emphasizes commentary unfavorable to the investment adviser or IAR would implicate the prohibition on testimonials. The investment 

adviser may publish only the totality of the testimonials from an independent social 

media site and may not highlight or give prominence to a subset of the testimonials. 

•	 Investment adviser or IAR sites may publish the testimonials from an independent social media site in a content-neutral manner, such as by chronological 

or alphabetical order, which presents positive and negative commentary with 

equal prominence. 

•	 Social media users, however, are free to personally display the commentary 

and sort by any criteria, including by the lowest or highest rating. Investment 

adviser and IAR sites may facilitate a user’s viewing of the commentary by 

providing a sorting mechanism as long as the investment adviser or IAR site 

does not itself sort the commentary. 

Q5. May an investment adviser or IAR publish testimonials from an independent social 

media site that includes a mathematical average of the public commentary? 

A5. Publication by an investment adviser or IAR of such testimonials from an independent social media site would not raise any of the dangers that rule 206(4)-1(a)

(1) was designed to prevent if the independent social media site were designed 

to make it equally easy for the public to provide negative or positive commentary 

about an investment adviser or IAR.

•	 Investment advisers or IARs could publish testimonials from an independent 

social media site that include a mathematical average of the commentary 

provided that commenters themselves rate the investment advisers or IARs 

based on a ratings system that is not designed to elicit any pre-determined 

results that could benefit any investment adviser or IAR.

•	 The independent social media site, the investment adviser and the IAR may 

not provide a subjective analysis of the commentary.16

Inclusion of on Investment Adviser Advertisements on Independent 

Social Media Site

Q6. May an investment adviser or IAR publish public commentary from an independent 

site if that site also features the investment adviser or IAR’s advertising?
IM GUIDANCE UPDATE 6

A6. The existence of an investment adviser or IAR’s advertisement within the architecture of an independent site that also contains independent public commentary 

does not, in combination, create a prohibited testimonial or otherwise make the 

advertisement false or misleading, provided that the investment adviser complies 

with the material connection and independence factors described above and 

provided that the advertisement is easily recognizable to the public as a sponsored 

statement. 

•	 In other words, an advertisement would not cause the investment adviser 

or IAR’s publication of the independent social media site’s commentary to 

violate rule 206(4)-1 where (1) it would be readily apparent to a reader that 

the investment adviser or IAR’s advertisement is separate from the public 

commentary featured on the independent social media site and (2) the receipt 

or non-receipt of advertising revenue did not in any way influence which public 

commentary is included or excluded from the independent social media site. 

Reference to Independent Social Media Site Commentary Investment Adviser 

Non-Social Media Advertisements

Q7. May an investment adviser or IAR refer to public commentary from an independent 

social media site on non-social media advertisements (e.g., newspaper, radio, 

television)?

A7. An investment adviser or IAR could reference the fact that public commentary 

regarding the investment adviser or IAR may be found on an independent social 

media site, and may include the logo of the independent social media site on its 

non-social media advertisements, without implicating the testimonial rule. 

•	 For example, an IAR could state in its newspaper ad “see us on [independent 

social media site],” to signal to clients and prospective clients that they can 

research public commentary about the investment adviser or IAR on an 

independent social media site. 

•	 In contrast, an investment adviser or IAR may not publish any testimonials from 

the independent social media site on the newspaper ad without implicating the 

testimonial rule.17

Client lists

Q8. Would a list or photographs of “friends” “or “contacts” on an investment adviser 

or IAR’s social media site that is viewable by the general public be considered a 

testimonial or otherwise violate section 206(4) or rule 206(4)-1?
IM GUIDANCE UPDATE 7

A8. It is common on social media sites to include a communal listing of contacts or 

friends. The staff has stated that an advertisement that contains a partial client list 

that does no more than identify certain clients of the adviser cannot be viewed 

either as a statement of a client’s experience with, or endorsement of, the investment adviser, and therefore is not a testimonial.18 Such an advertisement, however, 

could be false or misleading under rule 206(4)-1(a)(5) depending on the facts and 

circumstances. 

•	 If the contacts or friends are not grouped or listed so as to be identified as 

current or past clients of an IAR, but are simply listed by the social media site 

as accepted contacts or friends of the IAR in the ordinary course, such a listing 

of contacts or friends generally would not be considered to be in violation of 

rule 206(4)-1(a)(1). 

•	 However, if an IAR attempts to create the inference that the contacts or friends 

have experienced favorable results from the IAR’s investment advisory services, 

the advertisement could be considered to be in violation of section 206(4) and 

rule 206(4)-1. 

Fan/Community Pages

Q9. Individuals unconnected with a particular investment adviser or IAR may establish 

“community” or “fan” or other third-party sites where the public may comment on 

a myriad of investment topics, along with commentary regarding an investment 

adviser firm or individual IARs. Do such sites raise concerns under rule 206(4)-1?

A9. In the ordinary course, a third party’s creation and operation of unconnected 

community or fan pages generally would not implicate rule 206(4)-1. We strongly 

caution investment advisers and supervised persons when publishing content from 

or driving user traffic to such sites (including through hyperlinks to such sites), 

particularly if the site does not meet the material connection and independence 

conditions described above. The Commission has stated that: 

any SEC-registered investment adviser (or investment adviser that is required 

to be SEC registered) that includes, in its web site or in other electronic communications, a hyperlink to postings on third-party web sites, should carefully 

consider the applicability of the advertising provisions of the [Advisers Act]. 

Under the Advisers Act, it is a fraudulent act for an investment adviser to, 

among other things, refer to testimonials in its advertisements.19
IM GUIDANCE UPDATE 8

Endnotes

1 For purposes of this guidance, “publication” refers to any form of real-time broadcast through social media or the Internet whether by hyperlinking, posting, livestreaming, tweeting, or forwarding or any similar public dissemination and, does not 

relate to advertisements on non-Internet or non-social media sites, such as paper, 

television or radio. Social media allows for instantaneous updating of posted commentary and concurrent viewing of all of the comment history; in contrast, paper, 

television and radio are static media that reflect public commentary at a particular 

point in time and are limited media that would typically not reproduce all of the 

available public commentary simultaneously (often due to cost, space and other 

considerations).

2 As used herein, “independent social media sites” refers specifically to third-party 

social media sites that predominantly host user opinions, beliefs, findings or experiences about service providers, including investment advisory representatives or 

investment advisers (e.g., Angie’s List). An investment adviser’s or IAR’s own social 

media profile or account that is used for business purposes is not an “independent 

social media site.” 

3 This IM Guidance Update only addresses the use by a firm or IARs of social media 

sites for business purposes. This Update does not address the use by individuals of 

social media sites for purely personal reasons. This Update does not seek to address 

any obligations under state law of social media for business use. In addition, this 

guidance does not seek to address the use of social media sites by broker-dealers.

4 Any such advertisements also must comply with rule 206(4)-1(a)(5).

5 Investment Advisers Act Rel. No. 121 (Nov. 2, 1961) (adopting rule 206(4)-1).

6 See Richard Silverman, Staff No-Action Letter (pub. avail. March 27, 1985).

7 See Cambiar Investors, Inc., Staff No-Action Letter (pub. avail. Aug. 28, 1997) 

(“Cambiar”).

8 See DALBAR, Inc., Staff No-Action letter (pub. avail. March 24, 1998) (“DALBAR”).

9 See New York Investors Group, Inc., Staff No-Action Letter (pub. avail. Sept. 7, 1982); 

Stalker Advisory Services, Staff No-Action Letter (pub. avail. Feb. 14, 1994). See also 

Kurtz Capital Management, Staff No-Action Letter (pub. avail. Jan. 22, 1988).

10 See Cambiar, supra note 7.

11 Id. (“For example, the inclusion of a partial client list in an adviser’s advertisement 

has the potential to mislead investors if the clients on the list are selected on the 

basis of performance and this selection bias is not adequately disclosed. A list that 

includes only advisory clients who have experienced above-average performance 

could lead an investor who contacts the clients for references to infer something 

about the adviser’s competence or about the possibility of enjoying a similar investment experience that the investor might not have inferred if criteria unrelated to the 

client’s performance had been used to select the clients on the list or if the selection bias was fully and fairly disclosed.”).
IM GUIDANCE UPDATE 9

12 See Dan Gallagher, Staff No-Action Letter (pub. avail. July 10, 1995). Advisers that 

publish advertisements regarding non-investment related commentary remain 

subject to the fiduciary responsibilities imposed by section 206(1) and (2) of the 

Advisers Act. Thus an adviser cannot use social media to perpetrate affinity frauds, 

which are investment scams that prey upon members of identifiable groups, such 

as religious or ethnic communities, the elderly, or professional groups. Affinity 

frauds can target any group of people who take pride in their shared characteristics, 

whether they are religious, ethnic, or professional. See http://www.sec.gov/investor/

pubs/affinity.htm. 

13 Some independent social media sites may have member fees or subscriptions payable by users. An investment adviser or IAR’s publication of public commentary 

from a site that charges member or subscription fees to public users would not call 

into question the independence of the independent social media site for purposes 

of our views herein. 

14 Independent social media sites may have editorial policies that edit or remove 

public commentary violative of the site’s own published content guidelines (e.g., 

prohibiting defamatory statements; threatening language; materials that infringe on 

intellectual property rights; materials that contain viruses, spam or other harmful 

components; racially offensive statements or profanity). An investment adviser or 

IAR’s publication of public commentary that has been edited according to such an 

editorial policy would not call into question the independence of the independent 

social media site for purposes of the staff’s views herein. 

15 As explained in Q6 below, any arrangement whereby the investment adviser or IAR 

compensated the independent social media site, including with advertising or other 

revenue, in order to publish or suppress the publication of anything less than the 

totality of the public commentary submitted could render any use by the IAR or 

investment adviser on its social media site violative of the prohibition on testimonials.

16 See DALBAR, supra note 8.

17 See supra note 1.

18 See Cambiar, supra note 7. 

19 See Commission Guidance on the Use of Company Websites at note 83, Investment 

Company Act Rel. No. 28351 (Aug. 1, 2008). See also SEC Interpretation: Use of 

Electronic Media, Investment Company Act Rel. No. 24426 (May 4, 2000).
IM GUIDANCE UPDATE 1 0

This IM Guidance Update summarizes the views of the Division of Investment Management 

regarding various requirements of the federal securities laws. Future changes in laws or 

regulations may supersede some of the discussion or issues raised herein. This IM Guidance 

Update is not a rule, regulation or statement of the Commission, and the Commission has 

neither approved nor disapproved of this IM Guidance Update.

The Investment Management Division works to:

s protect investors

s promote informed investment decisions and 

s facilitate appropriate innovation in investment products and services 

through regulating the asset management industry.

If you have any questions about this IM Guidance Update, please contact:

Catherine Courtney Gordon

Chief Counsel’s Office/Public Inquiry

Phone: 202.551.6825

Email: IMOCC@sec.gov