5 Stars: Third-Party Ratings and the New SEC Marketing Rule

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Confused about how the new SEC marketing rule differentiates between third-party ratings, testimonials, and endorsements? Get some clarity here.

We continue our blog post series on the new SEC marketing rule with a focus on third-party ratings. Other posts in the series cover a range of topics, including the expanded definition of advertising, leveraging technology, testimonials and endorsements, performance advertising, hypothetical performance, review and approval of ads, social media advertising, and overall best practices. Here, we examine rule requirements for third-party ratings, which continue to be permitted in ads if they meet certain criteria.

But what exactly are third-party ratings, and how do they differ from testimonials and endorsements? Read on.

What Are Third-Party Ratings?

As you interpret and implement the new marketing rule, use this definition to distinguish third-party ratings from testimonials and endorsements.

Third-Party Ratings

The requirement for third parties to be unrelated to advisers helps mitigate biased ratings. Unlike testimonials and endorsements, third-party ratings are made by people in the business of providing ratings or rankings. For more information on relevant rule requirements and restrictions, check out our blog post on testimonials and endorsements.

Due Diligence Requirement

The new marketing rule prohibits ads from including third-party ratings unless they adhere to the due diligence requirement.

Due Diligence Requirement

The due diligence requirement ensures that any third-party ratings included in ads are unbiased and therefore reliable to investors. In other words, investors need to know that the ratings they’re using to make investment decisions stem from credible sources and present complete picture of an adviser’s track record as perceived by other investors.

Disclosure Requirement

The new marketing rule also includes a disclosure requirement that has three key components.

Disclosure Requirement

The disclosure requirement ensures that third-party ratings are presented contextually in a way that helps establish their trustworthiness. The three required disclosures noted above—when the ratings occur and apply, who makes the ratings, and how the ratings are paid for—must accompany all third-party ratings. As with testimonials and endorsements, the new rule requires advisers to disclose any cash or non-cash compensation associated with third-party ratings used in ads. Examples of third-party ratings that fall under this section of the rule and require disclosure include the Five Star Wealth Manager award and Barron’s Top Financial Advisors award.


As always, we’re here to help you navigate the nuances of the new marketing rule. Please get in touch with any questions or suggestions for future blog posts. In our next post, we’ll consider recordkeeping and Form ADV requirements.

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