SEC NEWS AND SPEECHES—Commission staff updates FAQs related to advisers’ marketing compliance - 24 March 2025

Separately, the Division of Investment Management’s Analytics office reports money market funds’ net assets rose in the latest period.

The staff of the SEC’s Division of Investment Management has issued updated frequently asked questions (FAQs) relating to Rule 206(4)-1 under the Investment Advisers Act of 1940, also known as the Marketing Rule. The guidance includes advice on compliance dates, time-period requirements, use of extracted performance data, and the presentation of the gross and net performance of a total portfolio.

Key FAQ topics. Importantly, the SEC said if an adviser shows the gross performance of an extract in an advertisement (that is, the results of one investment or a group of investments in a private fund or other portfolio), the rule requires the adviser to also show the net performance of the extract. But, the guidance states, if an adviser clearly identifies the gross and net performance of the total portfolio from which an extract was taken, calculated according to the requirements of the marketing rule, there is little risk that presenting just the gross performance of an extract will be misleading.

Similarly, the marketing rule does not define “performance” and, as a result, investment advisers may need to determine whether certain portfolio or investment characteristics, such as yield, coupon rate, contribution to return, volatility, geographic returns, and other similar metrics, are characterized as “performance” under rule 206(4)-1(d)(1). Even if such characteristics were to qualify as performance, calculating these characteristics net of fees and expenses may lead to misleading results. However, in the staff’s view, when an adviser prominently displays the gross and net performance of the total portfolio calculated according to the requirements of the marketing rule -- and provides information about the characteristic and how it is calculated -- there is little risk that prospective clients and investors will be misled about the impact of fees and expenses on their returns.

Finally, the marketing guidance on time periods indicates that if a firm is unable to calculate one-, five-, and 10-year performance data in accordance with rule 206(4)-1(d)(2) immediately following a calendar year-end, the firm can use performance information that is at least as current as the interim performance information in an advertisement until it can comply with the year-end requirement. The staff said a reasonable period to calculate performance results based on the most recent calendar year-end generally would not exceed one month.

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