SEC Refreshes Marketing Compliance Guidelines: A Game Changer for Investment Advisers

News Summary

On March 19, 2025, the SEC updated its Marketing Compliance FAQs, easing the requirements for investment advisers regarding performance data in advertisements. Advisers can now present gross performance data without accompanying net performance, provided they follow specific guidelines. This change aims to simplify marketing for advisers while enhancing clarity for investors. Flexibility in presenting investment characteristics and different time periods for data presentation is also now permitted. Overall, these updates promise a more transparent dialogue between advisers and their clients.

SEC Refreshes Marketing Compliance Guidelines: A Game Changer for Investment Advisers

On March 19, 2025, the U.S. Securities and Exchange Commission (SEC) took a major step in updating its Marketing Compliance FAQs regarding Rule 206(4)-1 under the Investment Advisers Act of 1940, commonly known as the Marketing Rule. This update has brought some much-needed clarity to the way investment advisers present performance data in their advertisements, particularly involving extracted performance and related characteristics.

A Breath of Fresh Air for Advisers

So, what’s new? One significant change is that investment advisers are now allowed to present gross performance data without having to also display corresponding net performance data, as long as they follow specific guidelines. This is a notable shift from previous requirements, which mandated that if an adviser showcased the gross performance of investments, they had to include net performance as well. With this update, the SEC has not only eased reporting burdens but also brought relief to private fund advisers who often grappled with these complicated requirements.

Understanding the Implications

The SEC has made it clear that while they will not recommend enforcement action against advisers who decide to display gross performance data without including net performance, they must adhere to certain stipulated conditions. This is a great opportunity for advisers to showcase their performance metrics in a way that may resonate better with investors while aligning with the SEC’s updated expectations.

Performance-Related Characteristics Explained

The second FAQ addresses the presentation of important portfolio or investment characteristics such as yield, volatility, and attribution analyses under the Marketing Rule. Even better, the updated guidance notes that it might be impossible or misleading to calculate these performance-related characteristics on a net basis. Such flexibility is a boon for advisers, freeing them from the earlier restrictions that often led to confusion and varied practices.

Time Periods and Flexibility

What’s more, the SEC highlighted that advisers can use different time periods for presenting performance-related characteristics than what is specified by the Marketing Rule, as long as these differences are clearly disclosed. This creates room for creative and tailored presentations that can better meet client expectations without crossing regulatory boundaries.

Treading Carefully with New Changes

However, while these updates are seen as liberating, investment advisers must still ensure they are compliant with both the revised FAQs and the established conditions of the existing Marketing Rule. Strategic revisions to marketing materials may be necessary to align with these updates, including appropriate disclosures that accompany any gross-only performance figures.

A Nod of Approval

Positive reactions are starting to come in. The Managed Funds Association recently expressed support for the SEC’s updates, suggesting that the changes align closely with what investors need and what advisers are obligated to provide. These sentiments echo the widespread relief felt across the industry, envisioning a more transparent and effective way of presenting performance data.

In Closing

As this new chapter begins with SEC’s updated Marketing Compliance FAQs, it reflects a more understanding approach towards the challenges that investment advisers face in the fast-paced world of finance. By allowing for the presentation of gross performance data and breaking down some of the shows that tied their hands, this change is set to pave the way for a more transparent dialogue between advisers and their prospective clients, making the market more accessible and understandable for everyone involved.

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Additional Resources

• Holland & Knight
• McDermott Will & Emery
• K&L Gates
• InvestmentNews
• Wikipedia: Investment Adviser
• Google Search: SEC Marketing Rule 2025
• Encyclopedia Britannica: Securities and Exchange Commission
• Google News: SEC Marketing Rule Updates