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New SEC Updates Make Marketing Performance Data Easier for Investment Advisers

A financial advisor examines new SEC compliance updates that simplify marketing performance data.

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News Summary

The U.S. Securities and Exchange Commission (SEC) has introduced new guidance to simplify how investment advisers present performance data in advertisements. Key changes include the ability to showcase gross performance figures without mandatory net figures, easing compliance challenges for advisers. These updates are designed to enhance clarity and flexibility in marketing practices, particularly benefiting private fund advisers.

New SEC Updates Make Marketing Performance Data Easier for Investment Advisers

On March 19, 2025, the U.S. Securities and Exchange Commission (SEC) dropped some exciting updates regarding the Marketing Compliance FAQs tied to Rule 206(4)-1 from the Investment Advisers Act of 1940. Yes, that’s quite a mouthful! But don’t worry; we’ll break it down for you.

What’s Changed?

The SEC’s Division of Investment Management has rolled out new interpretative guidance that focuses on how investment advisers can present performance data in their advertisements. This update is particularly about the presentation of extracted performance and performance-related characteristics. The big news? Advisers can now show performance numbers based solely on gross figures without needing to include corresponding net figures, under specific conditions.

A Quick FAQ Rundown

The first of the new FAQs clarifies a major point. Previously, if an adviser showcased the gross performance of any investments, they had to also provide net performance figures. With the updated guidance, this requirement has been tossed out the window! The SEC has stated that they won’t recommend any enforcement action if an adviser shows gross performance without net information, as long as they meet particular conditions.

More Information on Portfolio Characteristics

The second new FAQ tackles how advisers should present portfolio or investment characteristics. Think of things like yield, volatility, and attribution analyses. The SEC recognized that determining these performance-related characteristics on a net basis can sometimes be unfeasible or even misleading—hence the new guidance. This flexibility means advisers have a bit more room to maneuver when sharing important metrics.

What This Means for Advisers

These updates are seen as a breath of fresh air, especially for private fund advisers who have found previous compliance requirements challenging and even somewhat confusing. The updates allow for more straightforward communication while obtaining necessary compliance with the Marketing Rule.

Keeping it Clear

The FDA also pointed out that time periods for performance-related characteristics might differ from what the Marketing Rule specifies. This provides some much-needed flexibility in calculating this kind of information, as long as they’re upfront about how they got those numbers.

Understanding the Ambiguity

As with any regulatory changes, there remains a bit of ambiguity. The revisions indicate that some performance-related characteristics may not fit under the definition of “performance.” This aspect could lead to different interpretations among investment advisers. So, compliance isn’t just about following the checkboxes; it requires a nuanced understanding of these updates.

What Should Advisers Do Next?

Investment advisers still need to make sure they’re aligning both the updated FAQs and the original requirements of the Marketing Rule. The very first iteration of these FAQs released in January 2023, which required net reporting for extracted performance, created a lot of confusion and inconsistent practices. Now, advisers are encouraged to adapt their marketing materials in a way that fits the new conditions.

Supporting Voices

Notably, the Managed Funds Association expressed their support for the SEC’s updates, stating that these changes align better with both investor needs and the inherent obligations of advisers. It’s always nice to see regulatory changes that aim to ease the burdens on financial advisors and make things clearer for everyone involved.

Wrapping Up

In summary, the SEC’s updates offer valuable clarity and relief to investment advisers, allowing streamlined performance presentations that could make a significant difference in how they engage with investors. As always, the key is to ensure that adequate disclosures accompany any advertising that features gross-only performance metrics. So, if you’re in this field, it’s time to review your marketing tactics and make sure you’re in the loop with the new guidelines!