Marketing Rule FAQ Updates | Maxwell Baker Insights
Vigilant Insights
Introduction
The SEC has issued updated guidance to its Marketing Rule FAQs, aiming to address on-going industry confusion around the use of testimonials and endorsements, as well as the presentation of net performance data in advertisements.
The clarifications are particularly relevant for Advisers navigating paid endorsements and fee-related performance disclosures. The updates signal the SEC’s intent to provide greater flexibility while reinforcing the need for clear, accurate, and non‑misleading marketing practices.
One of Vigilant’s Directors, Maxwell Baker, Esq., shared his insights with FundFire on the SEC’s updated Marketing Compliance FAQs. Key takeaways from his insights are summarized below.
Maxwell Baker Insights
The updated FAQ underscores that the permissibility of using actual‑fee net performance is not subject to a blanket prohibition but instead depends on a facts‑and‑circumstances analysis and the adequacy of disclosures. The guidance recognizes that Firms may take different approaches to explaining fee differences, rather than requiring a single mandated methodology.
For Alternative Asset Managers in particular, the clarification has meaningful implications. Firms marketing performance to investors who may pay higher fees than those reflected in historical returns must directly address that discrepancy. This can be accomplished through model‑fee net performance, side‑by‑side comparisons, or other reasonable methods, provided the disclosures clearly explain the impact of fee differences.
Overall, the FAQ pushes Firms to reassess how performance information is presented, ensuring that marketing materials accurately reflect how returns may differ for current or prospective investors based on fee structures.
Vigilant’s Conclusion
The SEC’s updated Marketing Rule FAQ provides clarification for Firms that have struggled to interpret prior guidance, particularly around testimonials, endorsements, and net performance calculations. While the updates offer increased flexibility, they also reinforce the importance of thoughtful disclosures and careful, well‑documented marketing decisions.
Firms should take this opportunity to review their existing marketing materials, endorsement arrangements, and performance presentations to confirm alignment with the clarified guidance.
Proactive evaluation and documentation can help mitigate regulatory risk and demonstrate a good‑faith effort to comply with the SEC’s expectations in an evolving regulatory landscape.