Overview

Advisors who request that referrals be made on their behalf are required by Rule 206(4)-1 of the Investment Advisers Act of 1940 to maintain a reasonable belief that certain disclosures are provided at the time of the referral. This new SEC marketing rule replaces the solicitor rule, which governed referrals and solicitation activities, and now considers such activities to be testimonials or endorsements depending on whether the promoter, or referral provider, is a client or nonclient.

• A testimonial is defined as any statement by a current client about the client’s experience with the advisor or their supervised persons (i.e., staff).

• An endorsement is defined as any statement by a person other than a current client that indicates approval, support, or recommendation of the advisor or their supervised persons (i.e., staff) or describes that person’s experience with the advisor or their supervised persons.

Instructions

If you are providing a testimonial or endorsement (e.g., in the form of a referral) for an advisor in response to a request from them to do so, you are required to disclose the following information clearly and prominently* at the time you provide the referral:

• Whether you are a current client of the advisor

• Description of any material conflicts of interest you may have in promoting the advisor resulting from your relationship with them

Please note: Commonwealth advisors are prohibited from providing any compensation to an individual or entity to provide a testimonial or endorsement without an approved Commonwealth Alliance Program (CAP) or financial institution networking agreement. For more information on compensated promoter agreements, please contact RIA Compliance at riacompliance@commonwealth.com.

Please contact Compliance with any questions at x9603 or at compliance@commonwealth.com.