WHO

NASAA (North American Securities Administrators Association), via its Investment Adviser Regulatory Section Policy & Review Project Group, issued a Notice of Public Comment on proposed amendments to four model rules covering investment adviser advertising.

WHAT

A proposal to amend NASAA’s model advertising and recordkeeping rules to align with the SEC’s 2020 Marketing Rule (Rule 206(4)-1) and related provisions.
If adopted, states could allow activities previously prohibited, including:
- Testimonials and endorsements (regulated with strict disclosure compliance)
- Use of third‑party ratings/rankings (subject to due diligence and disclosures)
- Certain forms of performance advertising, including predecessor performance, with balanced, multi‑period, net‑and‑gross disclosures.
Updates also impact definitions of “advertisement,” and revise recordkeeping requirements to match the SEC’s scope.

Proposal issued July 29, 2025, with public comment period ongoing now through August 28, 2025.

These are model rules that individual states may choose to adopt or incorporate by reference in whole or in part.
Some states (26 so far) have already updated rules to match federal standards; many may soon follow.

To eliminate disparities between SEC‑registered and state‑registered advisers; state‑registered advisers face restrictions that SEC‑registered firms do not, potentially putting them at a competitive disadvantage.
NASAA emphasizes investor protection and uniformity in regulatory frameworks across jurisdictions.

The proposed model rule changes include:

Revised definition of “advertisement” to include indirect or one‑to‑one communications involving hypothetical performance, testimonials, or endorsements, with limited exceptions (e.g. unsolicited queries, oral live communications).
Endorsements/testimonials permitted but conditioned on:
- Prominent disclosure of (1) testimonial vs. endorsement status, (2) compensation, (3) material conflicts, plus summary of compensation terms.
- Written agreements between adviser and promoter (unless compensation is “de minimis,” optional per state choice).
- Disqualification prohibitions for certain criminal/investment‑related offenses.
Third‑party ratings allowed if adviser performs due diligence on methodology, discloses source and compensation, and provides context around methodology.
Performance advertising permitted under SEC‑style guardrails: balanced presentation of multiple performance periods, inclusion of net and gross results, meaningful disclosures, limitations on predecessor performance usage and audience definition.
Recordkeeping enhancements, including retention of materials on endorsements/testimonials, third‑party rating questionnaires, performance calculations, and intended audience identification.

For State-Registered Advisers

Enhanced flexibility: May be allowed to use testimonials, endorsements, ratings, and more robust performance marketing—bringing them closer to SEC‑registered peers.
Competitive parity: Could level the playing field vis‑à‑vis federal advisers who already operate under these standards.
Disclosures and documentation burdens: New compliance obligations for oversight, written agreements, detailed disclosures, methodology diligence, and recordkeeping.

Review and comment: Consider participating in the public comment process by August 28, 2025, especially if your firm has state-registered clients or offices in multiple states.
Conduct a gap analysis: Compare your current policies against both existing state rules and the proposed model rule to identify necessary changes.
Begin assessing what areas of the business, policies and procedures, and advertising materials may be impacted by such changes, should they come into effect.

Compliance Risk Concepts (CRC) is following this issue and will provide updates and additional information as they become available.