← All rule pagesRule 206(4)-1(b)(4)
Testimonial/endorsement: prohibition on compensating ineligible (disqualified) persons
testimonialendorsementineligible-persondisqualification
Distilled from the rule
The adviser may not compensate, directly or indirectly, a person for a testimonial or endorsement if the adviser knows, or in the exercise of reasonable care should know, that the person giving the testimonial or endorsement is an "ineligible person" at the time the testimonial or endorsement is disseminated. Ineligible persons include those subject to certain SEC, CFTC, banking, or state regulatory disqualifying events as defined in (e)(7).
What violations look like
LinkedIn
A firm pays a former adviser (who was barred by the SEC two years ago) for a sponsored endorsement post about the firm’s service.
Why it's flagged: Compensating a barred or suspended person — even for an unrelated context — is prohibited under (b)(4). The disqualification follows the person across all paid promoter / endorsement work.
Compliant rewrite
Don’t compensate. Maintain a do-not-pay list and screen every prospective promoter against the SEC’s Disqualified Persons database before any deal closes.
Pitch deck
A keynote speaker the firm hires for an investor webinar has a state-level disciplinary action from 2018.
Why it's flagged: Risk Alert 12/16/25 read "ineligible person" more broadly than the industry expected — including state actions, not only federal disqualifications.
Compliant rewrite
Run every prospective compensated speaker through both the SEC IAPD and FINRA BrokerCheck before any engagement closes. State disciplinary databases too where relevant.
Run Rule 206(4)-1(b)(4) on your own copy.
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