Understanding the Impact of NASAA’s Model Advertising Rules on RIA Marketing Strategies
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Understanding the Impact of NASAA’s Model Advertising Rules on RIA Marketing Strategies
Understanding the Impact of NASAA’s Model Advertising Rules on RIA Marketing Strategies
The regulatory environment for investment adviser advertising is changing rapidly. After the SEC updated its Marketing Rule, state securities regulators have been working to align their own rules with these new standards. The North American Securities Administrators Association (NASAA) created a Model Advertising Rule to help states modernize their frameworks and bring consistency across jurisdictions.
As states adopt these model rules, Registered Investment Advisers (RIAs) registered at the state level face new marketing requirements. These changes affect how RIAs use testimonials, endorsements, lead generation, and performance advertising. Understanding these rules is critical to avoid compliance risks and maintain effective marketing strategies.
This post explains the key elements of NASAA’s Model Advertising Rules and what RIAs need to do to stay compliant while continuing to grow their businesses.
What NASAA’s Model Advertising Rules Mean for RIAs
NASAA’s Model Advertising Rule closely follows the SEC’s Marketing Rule but adds specific state-level requirements. The goal is to create a consistent regulatory environment while addressing concerns unique to state jurisdictions.
For RIAs, this means:
Marketing materials, websites, and social media posts must meet new disclosure and content standards.
Use of testimonials, endorsements, and third-party lead generation services is now allowed but strictly regulated.
Performance advertising must comply with detailed rules on calculation methods, time periods, and presentation.
These changes require RIAs to review and update their marketing policies, training, and documentation.
Promoter Agreements: Managing Testimonials, Endorsements, and Lead Generation
One of the biggest shifts is the formal recognition of promoter agreements. Previously, many state-registered advisers avoided client testimonials or endorsements due to prohibitions or unclear rules. NASAA’s Model Rule allows these marketing tools but requires strict compliance.
Key Requirements for Promoter Agreements
Written Agreements Are Mandatory
Any third party receiving compensation for endorsements, testimonials, or lead generation must have a formal, written agreement with the adviser. This agreement should clearly outline the terms, compensation, and responsibilities.
Disclose Conflicts Prominently
Transparency is essential. Advisers must disclose any material conflicts of interest related to the promoter relationship. This includes financial incentives or other arrangements that could influence the endorsement.
Monitor Promoter Activities
Advisers must supervise promoters to ensure compliance with advertising rules. This includes reviewing content for accuracy and adherence to disclosure requirements.
Practical Example
If an RIA pays a third-party service to generate leads or uses client testimonials on their website, they must:
Draft and sign a promoter agreement detailing compensation and expectations.
Include clear disclosures near the testimonial or endorsement explaining the relationship.
Regularly review the third party’s marketing materials to ensure compliance.
Failing to meet these requirements can lead to enforcement actions or reputational damage.
Performance Advertising: New Standards for Presenting Results
Performance advertising has always been a sensitive area for investment advisers. NASAA’s Model Rule sets clear standards to prevent misleading claims and ensure fair presentation.
What RIAs Must Do
Use Standardized Calculation Methods
Performance results must be calculated using methods consistent with SEC guidelines. This includes specifying time periods, fees deducted, and whether results are gross or net of fees.
Include Required Disclosures
Advertisements must disclose important information such as the impact of fees, the possibility of losses, and the fact that past performance does not guarantee future results.
Avoid Cherry-Picking Data
Advisers cannot selectively present only favorable results. Performance data should be comprehensive and representative of the adviser’s overall track record.
Example of Compliance
An RIA promoting a 5-year average return must:
Clearly state whether returns are net of fees.
Disclose that past performance is not indicative of future results.
Provide context on market conditions or investment strategies used.
This transparency helps build trust with clients and regulators alike.
Steps RIAs Should Take Now
To prepare for the state rollout of NASAA’s Model Advertising Rules, RIAs should:
Review Existing Marketing Materials
Identify testimonials, endorsements, and performance claims that may need updating.
Create or Update Promoter Agreements
Ensure all third-party relationships involving compensation have formal agreements.
Train Staff and Promoters
Educate everyone involved in marketing about the new rules and compliance expectations.
Implement Monitoring Processes
Set up regular reviews of marketing content and promoter activities.
Consult Legal and Compliance Experts
Work with professionals to interpret state-specific requirements and avoid pitfalls.
What This Means for Your Marketing Strategy
The new rules require RIAs to be more deliberate and transparent in their marketing. While this adds complexity, it also opens opportunities to use testimonials and endorsements legally and effectively.
By following NASAA’s Model Advertising Rules, RIAs can:
Build stronger client trust through clear disclosures.
Expand marketing channels with compliant third-party promoters.
Present performance data honestly to attract informed investors.
Staying ahead of these changes will protect your firm from regulatory risks and support sustainable growth.
The state-by-state adoption of NASAA’s Model Advertising Rules is reshaping how RIAs communicate with clients and prospects. Taking proactive steps now will help your firm navigate this evolving landscape confidently. Review your marketing practices, update agreements, and ensure transparency to meet these new standards and continue building your business with integrity.
Disclaimer: This post provides general information and does not constitute legal advice. RIAs should consult with qualified compliance professionals to address specific regulatory requirements.
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