On March 20, 2025, the U.S. Securities and Exchange Commission (SEC) issued additional guidance on its Investment Adviser Marketing Rule, clarifying longstanding gray areas that have challenged compliance teams and marketing departments alike. While the new FAQs provide helpful interpretations, they may also necessitate revisions to existing advertising materials, especially for firms promoting performance metrics.
Key Highlights of the New SEC Guidance
The Marketing Rule, originally adopted in 2020, has transformed the landscape for investment adviser advertising, consolidating decades-old advertising regulations into a modernized framework. Yet, some provisions remained open to interpretation. The SEC’s latest guidance specifically addresses how advisers should present performance-related data in marketing materials, with a focus on three critical areas: extracted performance, portfolio characteristics, and performance net of fees.
Extracted Performance: Gross vs. Net Requirements
A primary clarification revolves around the treatment of “extracted performance”—performance results that relate to a subset of investments within a portfolio. The SEC reiterated that if gross extracted performance is presented, net extracted performance must also be shown. However, the staff will not recommend enforcement action if advisers instead disclose total portfolio-level gross and net returns, provided that these figures are given equal prominence and are measured over identical time periods.
This nuance offers flexibility for advisers who may find it burdensome to isolate net extracted performance, but it also reinforces the need for transparent and balanced presentations.
Portfolio Characteristics: Performance or Not?
The FAQs also addressed portfolio characteristics such as yield, volatility, and attribution analysis. The SEC acknowledged ambiguity about whether these characteristics constitute “performance” under the rule, and noted that net-of-fee calculations in these cases could be difficult or potentially misleading.
To alleviate concerns, the Commission stated that firms may present these characteristics on a gross-only basis, so long as they include appropriate disclosures about the methodology and ensure that total portfolio gross and net performance are disclosed alongside, providing adequate context.
Broader Implications for Investment Firms
These clarifications could trigger updates to websites, marketing collateral, pitchbooks, and other advertising assets. Firms that previously omitted certain performance metrics or presented extracted data without accompanying net returns will need to revisit their materials to ensure they align with the SEC’s expectations.
Industry groups, including the Managed Funds Association, have welcomed the SEC’s willingness to address industry feedback, viewing this as a positive step toward balancing regulatory rigor with practical realities.
How RegEd’s Advertising Compliance Review Solution Helps
RegEd’s Advertising Review solution leverages advanced technologies to enhance efficiency throughout the marketing and advertising communication submission, review, collaboration, and approval processes, accelerating time to market for review items. This streamlined approach not only reduces the manual workload but also minimizes errors, ensuring that compliance standards are met more consistently. By centralizing the review process, the solution improves cross-departmental collaboration, enabling teams to work more seamlessly together. In addition, requirements under the Marketing Rule as well as a firm’s policies can be built into the review process, to make sure submitters and reviewers are following consistent standards. Firms benefit from a faster turnaround time, allowing them to adapt quickly to market demands and launch campaigns with confidence.
About RegEd
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