The SEC is thinking of revamping its regulations on investment advisor advertising and is looking at existing regulations at Finra — the self-regulator the SEC oversees — for a possible blueprint, according to news reports.

More specifically, the commission is looking at how Finra regulates client testimonials, Paul Cellupica, chief counsel of the SEC’s division of investment management, said at the Practising Law Institute’s “SEC Speaks” conference last week, according to Reuters. The SEC’s rules on investment advisor advertising prohibit them from using testimonials about themselves or their services and from even circulating or distributing anything that would refer to any testimonial, the newswire writes. That’s because the SEC sees testimonials as inherently misleading since they bring to light positive experiences while ignoring negative ones, according to Reuters.

Such a strict prohibition raised debate, and in 2014 the SEC allowed linking to review sites such as Yelp and Foursquare as long as all the comments, favorable and unfavorable, were publicly viewable and advisors didn’t link, share or “like” specific reviews, the newswire writes.

Finra, meanwhile, allows broker-dealers to use customer testimonials as long as they’re made by clients who have the necessary knowledge and experience to make an informed opinion, according to Reuters.


Under Finra’s rules, the testimonial must also include disclosures cautioning that it may not be representative of other clients’ experience, that it’s no guarantee of future results and that it was a paid testimonial in cases when there’s more than $100 paid for it, the newswire writes.

Cellupica also said that the SEC is analyzing how it can incorporate social media, which would overlap with changes to the testimonial rule, according to Reuters.