NASD on Testimonials
NASD rules prohibit exaggerated and misleading endorsements of investments or of investment returns (NASD Rule 2210(d)(1)). Testimonials must also include certain information: “advertisements or sales literature providing any testimonial concerning the investment advice or investment performance of a member or its products must prominently disclose the following: (1) the fact that the testimonial may not be representative of the experience of other clients; (2) the fact that the testimonial is not indicative of future performance or success; and (3) if more than a nominal sum is paid, the fact that it is a paid testimonial” (NASD Rule 2210(d)(2)(A).
SEC on Testimonials
Rule 206(4)-1 of the Investment Adviser Act of 1940. The goal is to prevent advertisements that are false and misleading.
Specific prohibitions bar an investment adviser from using testimonials of any kind. The SEC considers client testimonials inherently misleading because they highlight favorable experiences while ignoring unfavorable ones. In addition, testimonials communicate that all clients typically have a favorable experience, even though this may not be true. Finally, if the rules permitted testimonials, advisers might be tempted to provide extraordinary service to only a select few clients, with a view toward cultivating their endorsements for an advertisement.
Testimonials include a statement of the client's positive experience with the adviser or an endorsement. Using written client statements as part of an advertisement also would be a violation. Note that this section does not provide for any disclosures that, when accompanying a testimonial, would make it acceptable to use the testimonial.
Tennesee Insurance Department Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement, is subject to all the provisions of these rules. Kansas Insurance Law Testimonials, appraisals or analysis used in advertisements must be genuine; represent the current opinion of the author; be applicable to the policy advertised, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective insureds as to the nature or scope of the testimonial, appraisal, analysis or endorsement. In using testimonials, appraisals or analysis; the insurer or insurance producer makes as its own all the statements contained therein, and these statements are subject to all the provisions of this rules Rhode Island Insurance Law Testimonials used in advertisements must be genuine, represent the current opinion of the author, be applicable to the policy advertised and be accurately reproduced. The insurer, in using a testimonial, makes as its own all of the statements contained therein, and the advertisement, including such statement, is subject to all the provisions of these rules. When a testimonial is used more than one year after it was originally given, a confirmation must be obtained.
Similar rules concerning the use of testimonials in the sale of insurance products are embodied in other state insurance laws. DON'T JEOPARDIZE YOUR LICENSE!
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