Compensated testimonial disclosure controls

The compensated testimonial disclosure controls requirement means you must disclose, clearly and prominently, any compensation and material conflicts tied to testimonials or endorsements used in your investment adviser marketing. Operationalize it by (1) inventorying who is giving testimonials, (2) tracking all compensation and relationships, (3) standardizing disclosure language per channel, and (4) proving pre-use review and retention under your books-and-records program. (17 CFR 275.206(4)-1)

Key takeaways:

• Treat every testimonial/endorsement as a trackable arrangement with defined compensation, conflict flags, and required disclosure text. (17 CFR 275.206(4)-1)
• Build channel-specific disclosure rules (website, social, video, third-party platforms) and enforce them through pre-approval workflows. (17 CFR 275.206(4)-1)
• Keep audit-ready evidence: agreements, disclosures as published, approvals, and retention records aligned to your adviser recordkeeping obligations. (17 CFR 275.204-2)

Compensated testimonials and endorsements create a predictable regulatory problem: investors may over-weight praise if they don’t understand the speaker was paid or has a material incentive to promote you. Under the SEC’s investment adviser marketing rule, you need controls that force disclosure of compensation and conflicts whenever you present testimonials or endorsements as part of your marketing. (17 CFR 275.206(4)-1)

For a CCO or GRC lead, the practical task is less about drafting a policy and more about building a repeatable operating system: identify every testimonial and endorsement in circulation, determine whether there is compensation (cash, fee credits, gifts, event sponsorship, referral benefits, or other items of value), identify conflicts (financial interests, affiliations, or other incentives), and then ensure the disclosure travels with the content wherever it appears. (17 CFR 275.206(4)-1)

Your exam risk usually shows up in two places: (1) “informal” influencer and referral relationships that marketing teams don’t treat as regulated advertising, and (2) missing evidence that you reviewed the content and can reproduce what was actually shown to the public. This page gives requirement-level implementation steps and the artifacts you should retain. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

Regulatory text

Requirement (operator view): Disclose compensation and conflicts for testimonials and endorsements. (17 CFR 275.206(4)-1)

What you must do in practice:

• If you use a testimonial or endorsement in marketing, you need controls that identify whether the speaker is compensated and whether there are material conflicts, then disclose those facts in a way a retail investor will notice and understand in the same channel where the statement appears. (17 CFR 275.206(4)-1)
• You must also be able to evidence the basis for your determination (what compensation existed, what conflicts were identified, and what disclosure was used) and retain related records under your adviser recordkeeping obligations. (17 CFR 275.204-2)

Plain-English interpretation (what the SEC expects you to get right)

A compensated testimonial is not prohibited by default, but undisclosed incentives are the problem. Your control objective is simple: a reasonable viewer should not be surprised to learn the speaker was paid or had an incentive. (17 CFR 275.206(4)-1)

Translate that into operational rules your teams can follow:

• Compensation is broader than cash. Anything of value provided because of the endorsement should trigger review and disclosure. (17 CFR 275.206(4)-1)
• Conflicts include relationships. Affiliations, revenue-sharing, referral benefits, and other incentives can be “material” even when payment is indirect. (17 CFR 275.206(4)-1)
• Disclosures must travel with the content. A disclosure on a separate page is a common failure mode if the user is unlikely to see it in the moment they consume the testimonial. (17 CFR 275.206(4)-1)

Who it applies to (entity + operational context)

Applies to: Registered Investment Advisers and their supervised persons involved in marketing, advertising, business development, and client communications. (17 CFR 275.206(4)-1)

Operational contexts where this shows up:

• Website and landing pages featuring client quotes, success stories, or star ratings.
• Social media (organic posts, paid ads, influencer posts, “partner” content).
• Video and podcasts where a guest endorses your firm or strategy.
• Third-party review/rating platforms where you highlight reviews or embed widgets.
• Referral and solicitor-like arrangements where promoters receive benefits tied to introductions or conversions. All of the above are treated as marketing inputs you must govern, not “PR content” that can bypass compliance review. (17 CFR 275.206(4)-1)

What you actually need to do (step-by-step)

1) Build an inventory of testimonials and endorsements

Create a living register that captures every instance, including:

• Content identifier (URL, post ID, creative filename)
• Channel (website, LinkedIn, YouTube, third-party platform)
• Speaker identity and relationship to the firm
• Whether the content is a testimonial or endorsement
• Status (draft, approved, published, retired) This inventory becomes your control backbone and speeds exams because you can answer “show me all testimonials used in the last period” quickly. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

2) Identify compensation and conflicts using a standard intake

Use an intake form required before any testimonial is published. Minimum fields:

• Compensation provided (type, description, who paid, when paid, condition for payment)
• Non-cash benefits (fee waivers, gifts, event access, services, sponsorship)
• Affiliations/conflicts (employee, affiliate, family relationship, business relationship)
• Third parties involved (agency, influencer network, lead-gen partner) Then require attachment of the agreement, invoice, or other proof. (17 CFR 275.206(4)-1)

Practical control: make marketing unable to submit for approval without completing the intake and attaching the agreement (or explaining why no agreement exists). (17 CFR 275.206(4)-1)

3) Map each channel to an approved disclosure pattern

Define “channel rules” so your team does not improvise disclosures. For each channel, specify:

• Where the disclosure must appear (on-screen text, caption, near the quote, spoken disclosure)
• Minimum content elements (compensation + conflict statement)
• Formatting expectations (plain language, proximity to testimonial)
• How to handle character limits (short-form disclosure + link only if the link is truly unavoidable in that channel) Document the patterns as templates marketing must copy/paste. (17 CFR 275.206(4)-1)

Example disclosure building blocks (editable):

• “Paid testimonial: [Name] received [describe compensation] for this statement.” (17 CFR 275.206(4)-1)
• “Conflict: [Name] has a business relationship with [Firm] and may benefit from promoting it.” (17 CFR 275.206(4)-1)

Keep templates channel-specific, and store them in your approved marketing language library. (17 CFR 275.206(4)-1)

4) Enforce pre-use review with documented approvals

Implement a workflow that requires Compliance approval before publishing:

• Submission by marketing includes the content, intake form, and proposed disclosure
• Compliance reviewer checks (a) compensation/conflict completeness, (b) disclosure placement, and (c) consistency with internal standards
• Approver signs off with name/date and retains the final version that went live This is where many firms fail: they approve a draft but cannot evidence what was actually posted after edits. Require capture of the “as-published” artifact. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

Daydream fit (earned mention): Daydream can act as the control system of record by tying each testimonial to its intake, compensation data, required disclosure language, and the approval and retention trail, so you can answer exam requests without reconstructing history from Slack and email. (17 CFR 275.204-2)

5) Monitor drift after publication

Controls must detect when disclosures break over time:

• Website updates remove a footnote
• Social reposts strip captions
• Platform UI changes move disclosures below “more” folds Set a periodic sampling review across channels. Log findings, fixes, and re-approvals. Retain evidence of the monitoring and remediation. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

6) Train the front line (marketing + relationship owners)

Training should be role-based:

• Marketing: what counts as compensation, where disclosures must go, “no publish without approval”
• Business development: referral benefits and informal arrangements trigger disclosure
• Supervised persons: do not request reviews/testimonials in exchange for benefits without routing through compliance Maintain attendance and content used for training. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

Required evidence and artifacts to retain

Retain records in a way you can reproduce promptly for an exam request. Align to your adviser recordkeeping program. (17 CFR 275.204-2)

Minimum artifact set (practical checklist):

• Testimonial/endorsement inventory register (current and historical) (17 CFR 275.204-2)
• Signed agreements or written terms with promoters/influencers/third parties (17 CFR 275.204-2)
• Compensation proof (invoices, payment confirmations, non-cash benefit documentation) (17 CFR 275.204-2)
• Conflict assessment (intake form + reviewer notes) (17 CFR 275.204-2)
• Final approved creative and as-published capture (screenshots, screen recordings, exported posts) (17 CFR 275.204-2)
• Approval records (who approved, when, what version) (17 CFR 275.204-2)
• Monitoring logs and remediation tickets (17 CFR 275.204-2)
• Training materials and completion evidence (17 CFR 275.204-2)

Common exam/audit questions and hangups

Expect questions framed as “show me” requests:

1. Show me all compensated testimonials and endorsements used in marketing. Provide the inventory plus filters for compensated arrangements. (17 CFR 275.206(4)-1)
2. Show me the disclosure that appeared with each testimonial at the time it ran. Produce as-published captures, not drafts. (17 CFR 275.204-2)
3. How do you determine whether a promoter is compensated? Provide the intake process and compensation tracking. (17 CFR 275.206(4)-1)
4. Who approves, and what is the escalation path for ambiguous conflicts? Provide workflow, RACI, and example escalations. (17 CFR 275.206(4)-1)
5. How do you ensure third parties don’t strip disclosures? Show contractual clauses + monitoring results. (17 CFR 275.206(4)-1)

Hangups that slow exams:

• Disclosures that exist “somewhere,” but not in proximity to the endorsement
• Inability to reproduce prior versions of web pages or social posts
• Marketing asserting “we didn’t pay them,” while business teams provided benefits or fee credits outside AP. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

Frequent implementation mistakes and how to avoid them

Mistake 1: Treating “gifted” or discounted services as non-compensation.
Fix: define compensation broadly in your intake form and require business owners to attest completeness. (17 CFR 275.206(4)-1)

Mistake 2: Disclosures added only on the campaign landing page.
Fix: require disclosures in the same unit of consumption (post, video description, on-screen). Use channel rules and QA checks. (17 CFR 275.206(4)-1)

Mistake 3: Approving the concept, not the final posted version.
Fix: require as-published capture and store it with the approval. (17 CFR 275.204-2)

Mistake 4: No contract controls over promoters and agencies.
Fix: add clauses requiring your approved disclosures, no edits without written approval, and cooperation for record retention. Store executed versions. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

Mistake 5: Review platforms and widgets treated as “independent.”
Fix: if you choose to display, curate, or highlight reviews, route through the same intake and disclosure control path. (17 CFR 275.206(4)-1)

Enforcement context and risk implications

No specific public enforcement cases were provided in the source catalog for this requirement, so this page does not list case citations.

Practically, the risk shows up as:

• Marketing rule violations if a reasonable investor is not told about compensation or conflicts tied to the endorsement. (17 CFR 275.206(4)-1)
• Books-and-records issues if you cannot produce evidence of what ran, who approved it, and what the compensation terms were. (17 CFR 275.204-2)

Regulators often treat weak evidence as a control failure even when your intent was compliant. Plan your program around reproducibility. (17 CFR 275.204-2)

Practical 30/60/90-day execution plan

Numeric timelines are common in project plans; treat the phases below as sequenced work, not calendar promises.

First phase (Immediate): stop-gap controls for new content

• Freeze publication of new testimonials/endorsements unless submitted through Compliance.
• Stand up the testimonial/endorsement register and require all new entries.
• Publish channel-specific disclosure templates and require copy/paste use. (17 CFR 275.206(4)-1)

Second phase (Near-term): inventory, contracting, and workflow hardening

• Backfill the inventory with all currently live testimonials and endorsements.
• Collect agreements and compensation proof; remediate missing disclosures on live assets.
• Implement a formal approval workflow and require as-published capture for each item. (17 CFR 275.204-2)

Third phase (Ongoing): monitoring, QA, and audit readiness

• Start periodic sampling across channels, including third-party platforms.
• Run training for marketing and business development; update onboarding.
• Test exam readiness: run a mock request to produce “all compensated endorsements + disclosures + approvals + proof of payment.” (17 CFR 275.204-2)

Frequently Asked Questions

What counts as “compensation” for a testimonial or endorsement?

Treat compensation as anything of value provided because of the testimonial or endorsement, not just cash. Your intake should capture both monetary and non-monetary benefits and route them for disclosure review. (17 CFR 275.206(4)-1)

Do we need disclosures if a client posts a positive review on their own?

If you are not paying them and not providing benefits tied to the statement, your compensated testimonial disclosure control may not trigger, but you still need to assess whether you are republishing or highlighting it as marketing. If you do use it in marketing, document your rationale and retain the as-used content. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

Can we put the disclosure on a separate webpage linked from the post?

Use that approach only if the disclosure is still clear and likely to be seen in context; many channels make this risky. Your channel rules should define acceptable placement, and Compliance should document the decision. (17 CFR 275.206(4)-1)

How do we control influencers or agencies who post on their own accounts?

Put contractual terms in place requiring your approved disclosure language and prohibiting edits without approval, then monitor actual posts and retain captures. If you cannot enforce compliance, treat the channel as disallowed. (17 CFR 275.206(4)-1) (17 CFR 275.204-2)

What evidence do examiners usually ask for first?

They often start with “show me the disclosures as they appeared” and “show me the compensation arrangement.” If you can produce executed terms, payment records, approvals, and as-published screenshots quickly, the exam becomes more controlled. (17 CFR 275.204-2)

Where does Daydream help most with this requirement?

Daydream is most useful as a single system to track each testimonial/endorsement from intake through approval and retention, with compensation/conflict fields and disclosure templates tied to the final published artifact. That reduces reconstruction work during exams. (17 CFR 275.204-2)