The SEC is considering issuing new guidelines regarding its marketing rule to clarify when advisers should include net and gross performance in their advertising.
SEC staff announced that they plan to publish two new marketing rules “In the near future” during the Investment Advisor Compliance Conference this week in Washington, DC
Information on the next page will try to calm the “important implementation challenges” that IAA has raised with SEC staff and review the information included on a PAI originally published in January 2023.
The marketing rule came into force in May 2021, with a date of compliance at the end of 2022. The rule dictates how and when advisers can use evidence and approval in ads, and the type of portfolio performance metrics that metric firms can use to sell themselves and their services.
According to IAAThe rule has continued to be a major concern for compliance officials, and the Commission's implementation division has brought numerous cases. Nine ria pays collectively $ 1.2 million to repay SEC allegations of ads violations last September.
Since the discovery of the rule, the question of whether a counselor (especially the private fund advisers) should include both net and gross investment performance has been a special concern, and a page 2023 that aims to clarify the question.
At that site, the SECourd that when a counselor shows the gross performance of a single investment or a group of investments from a private fund, he must also include net performance (ie after tariffs) of this single investment or a set of investments. When advisers report on the performance results of a group of investments derived from a portfolio (what he calls “performance to extract”), councilors must report those results on a net basis along with the gross performance of the total portfolio from which the investments came.
The Commission believed that the rule addressed the risk “councilors would pose a lucrative deceptive selective performance with the oversight.”
However, according to the IAA, the instruction updated by the SEC will allow councilors to advertise the gross performance of an individual investment (as well as portfolio and investment characteristics) while showing the net and gross performance of the entire portfolio (as long as both species are “visible” displayed in the ad).
According to the IAA, the updated instruction will also address issues “regarding the presentation of yield, attribution and other portfolio and investment characteristics.”