AI-drafted marketing under Rule 206(4)-1.
The substantiation requirement is what makes an invented statistic a violation, not a mistake.
Rule 206(4)-1 applies to AI-drafted material exactly as it applies to anything else, because it turns on what a communication does rather than what produced it. The provision that bites first is the substantiation requirement: an adviser may not make a material statement of fact it does not have a reasonable basis for believing it can substantiate on SEC demand. A model that invents a plausible statistic puts you in breach of that the moment the material goes out.
Why hallucination is a rule problem and not a quality problem.
Firms treat AI-invented facts as an editing issue — something that gets caught in proofreading, like a typo. Under the Marketing Rule it is categorically different, because the rule does not ask whether you intended the statement or noticed it. It asks whether you can substantiate it.
That makes the failure automatic rather than conditional. A fabricated industry figure in a prospect deck is a material statement of fact with no basis behind it, and it stays one whether a junior associate wrote it or a model did. The obligation sits with the adviser in both cases.
The useful consequence: the control is not better prompting and it is not a better model. It is a substantiation step that runs before anything leaves the building.
Four checks before it goes out.
Every number has a named source
Not a source the model cited. A source a person opened. Models produce citations that look correct and resolve to nothing, and the plausible-looking ones are the dangerous ones.
Every claim about your own firm is verified internally
Assets, tenure, client counts, credentials, capabilities. A model writing marketing copy will fill these in from context if you do not give them to it.
Anything forward-looking gets checked against (d)(6)
Projections, targets, model or backtested results. If it is in there, the hypothetical performance conditions apply and a generic disclaimer does not satisfy them.
The substantiation is kept where the ad is kept
Rule 204-2 requires copies of advertisements and the documentation supporting performance shown in them. Filing the backup separately is how firms end up unable to substantiate a claim they could have defended.
When a generated projection becomes hypothetical performance.
Rule 206(4)-1(d)(6) governs hypothetical performance, and the definition is broader than most firms assume. It reaches model performance, backtested performance, and targeted or projected returns. A tool that produces a projected outcome for a prospect is generating hypothetical performance whether or not anyone called it that.
The rule does not prohibit it. It attaches conditions, and the first one is the one AI makes hardest to satisfy:
- Policies and procedures reasonably designed to ensure the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience. A tool that generates a projection for anyone who enters numbers on a website is in tension with this by design.
- Sufficient information for the audience to understand the criteria used and the assumptions made. Which requires you to know what the tool assumed — a question worth asking a vendor before you deploy rather than after.
- Sufficient information, provided or offered, to understand the risks and limitations of using the hypothetical performance in making investment decisions.
A generic disclaimer at the bottom of the page does not meet any of the three. The relevance condition in particular is about who receives the projection, which is an audience control rather than a wording control.
An AI draft that went out is a record.
Rule 204-2 requires advisers to keep copies of advertisements along with documentation substantiating performance shown in them. Firms that treat AI output as scratch work tend to keep the final PDF and nothing else.
Keeping the prompt and the source material alongside the advertisement is not required by name. It is what makes substantiation possible eighteen months later, when the person who wrote it has left and the claim needs defending. That is the difference between a file that answers an examiner and one that starts an inquiry.
What counts as an advertisement.
Worth restating because AI expands the volume of borderline material. A communication is an advertisement if it offers advisory services to prospective clients, or offers new advisory services to current ones. That takes in far more than the website: prospect emails, pitch decks, one-pagers, social posts, newsletters that promote a service.
The reason this matters more now is throughput. A firm that produced four marketing pieces a quarter and now produces forty has not changed its obligations, only its exposure to them. The compliance page covers the supervision side, including the FINRA proposal that has not taken effect.
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Sources and standing.
Advisers Act Rule 206(4)-1, the Marketing Rule, has been in force with a compliance date of 4 November 2022. Hypothetical performance is addressed at (d)(6). Recordkeeping for advertisements sits in Rule 204-2. Last reviewed at source: September 2026.
- 17 CFR 275.206(4)-1, Investment adviser marketing (the Marketing Rule) (checked 2026-10-27)
- 17 CFR 275.204-2, Books and records to be maintained by investment advisers (checked 2026-10-27)
- FINRA Rule 2210, Communications with the Public (checked 2026-10-27)
This is not legal advice and it is not a substitute for your compliance counsel. It is how a practitioner who implements these systems reads the rule, written down so you can check it. If something here is wrong, tell me and it gets corrected.
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