The IAA anti-fraud provision apply to marketing materials sent to both clients and potential clients. Under the general IAA antifraud provision (Section 206), the SEC has adopted Rule 206(4)-1, which prohibits any registered adviser from using any advertisement (defined ini paragraph (b) of the Rule as including any communication sent to more than one person or other broadly published) that contains any untrue statement of material fact or is otherwise misleading.

The rule contains a number of specific restrictions relating to (i) a general prohibition on the use of testimonials, (ii) a prohibition on references to an incomplete list of past recommendations, (ii) a prohibition of any suggestion that a graph, chart of formula can determine what to trade, and (iv) a prohibition on suggesting that any material is free, unless it really is.

A substantial percentage of problematic advertisements very likely relate to misleading performance information. Advertisements as to performance information must conform to standards enunciated by the SEC and an adviser must be able to document that it followed those standards and that its numbers are genuine.