Updated Marketing Rule FAQs Released
SEC Releases
Introduction
As anticipated by Vigilant, it was announced on March 19th, 2025, that the SEC has released updated FAQs surrounding the SEC Marketing Rule.
This was originally hinted at the Investment Adviser Association (IAA) Conference in early March and has now been officially released. At that time, it was expected that the guidance would address the compliance challenges surrounding portfolio characteristics and extracted performance.
We have provided key takeaways from the FAQs that are listed below.
Key Takeaways
- There is “little risk” that gross performance of an extract from a Private Fund or other portfolio would be misleading as long as the Adviser prominently displays the gross and net performance of the total portfolio in a manner that is not otherwise materially misleading.
- The staff would not recommend an enforcement action in the above scenario if:
- The extracted performance is clearly identified as gross performance;
- The extracted performance is accompanied by the total portfolio’s gross and net performance with at least equal prominence to, and in a manner designed to facilitate comparison with, the extracted performance, and
- The gross and net performance of the total portfolio is calculated over the entire period the extracted performance is calculated.
- The staff would also not recommend enforcement if an adviser chooses to present in an advertisement one or more gross characteristics of a portfolio or investment if:
- The gross characteristic is clearly identified as being calculated without fees and expenses;
- The characteristic is accompanied by a presentation of the total portfolio’s gross and net performance with at least equal prominence to, and in a manner designed to facilitate comparison with, the gross characteristic, and
- The time period of the total portfolio performance covers the entire period of the gross characteristic.
Vigilant’s Conclusion
In conclusion, the staff’s guidance on portfolio characteristics and extracted performance, emphasizes the importance of transparency and clarity in Adviser advertising.
When displaying extracted performance, Advisers may present gross extracted performance without showing net extracted performance, as long as it is clearly identified as gross, they also present the gross and net performance of the total portfolio from which the extract was taken, and they ensure that both are equally prominent and cover the same time periods.
Similarly, when displaying portfolio or investment characteristics, Advisers may present gross characteristics without showing net characteristics, as long as they are clearly identified as gross, they also present the gross and net performance of the total portfolio from which the characteristic was taken, and they ensure that both are equally prominent and cover the same time periods.
Advisers must ensure that these presentations are not misleading and are consistent with the Rule’s requirements for accuracy and comparability, all while adhering to the general prohibitions against misleading advertising.
Schedule a call with Vigilant to learn more about how we can help support your Firm in a variety of ways surrounding the Marketing Rule and our Advertising and Marketing Review Services.