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There’s a lot of misinformation about soliciting reviews from clients.
There’s also confusion about the impact of the Investment Adviser Marketing Rule that went into effect on May 4, 2021.
This rule applies to SEC registered investment advisors. If you are state registered, you should consult your compliance attorney to ensure you comply with its advertising regulations as well.
This confusion isn’t helped by the fact that compliance departments vary widely in the advice they give about reviews.
New regulation
The SEC published a useful Compliance Guide which discusses all aspects of its new marketing rule. You should also review the Final Rule.
This article by Michael Kitces nicely summarizes the disclosure requirements for reviews and the additional requirement to ensure the review is fair, balanced and not false or misleading.
The SEC’s Compliance Guide lists several general prohibitions that govern advertisements, including reviews. Most of them center on ensuring the review is accurate, doesn’t mislead, and is fair and balanced, including how performance results are presented.
Reviews are also subject to other requirements, including disclosing whether the reviewer is an actual client, is being compensated or has conflicts of interest.
A hidden trap
A good reason not to solicit reviews is legal uncertainty. As this article in the Fordham Journal of Corporate & Financial Law notes, an issue arises when an advisor solicits Google My Business reviews.
By soliciting those reviews, the advisor may “inadvertently turn online reviews into ‘advertisements’ subject to the strictures of the Marketing Rule.” This is a more likely result when the advisor encourages clients to leave positive reviews or assists in creating the content for those reviews. This conduct might make the advisor liable for the content in the review, just as if it published this content itself.
