Compliance Considerations for Updated SEC Marketing Rule Guidance

Compliance Considerations for Updated SEC Marketing Rule Guidance

According to an article by Davis Wright Tremaine, the Securities and Exchange Commission issued two critical updates to its SEC Marketing Rule FAQ page on March 19, 2025. These updates clarify compliance expectations for investment advisers using performance data in marketing materials and address industry concerns regarding extracted performance and classifying certain portfolio characteristics as performance under the rule.

The first update provides relief for advisers using “extracted” performance or performance data from a subset of investments within a portfolio. Previously, the Marketing Rule required advisers to present gross and net extracted performance in advertisements, creating significant operational challenges. The SEC’s revised position indicates that enforcement action will not be recommended against advisers who omit net extracted performance, provided they clearly identify extracted performance as gross, present the total portfolio’s gross and net performance with equal prominence, and ensure performance data is calculated over the same time period.

The second update clarifies whether specific portfolio characteristics, such as yield, attribution metrics, and risk-adjusted return ratios, constitute performance under the rule. Industry participants had expressed concerns about whether these characteristics required net performance calculations, which could be impractical or misleading. The SEC staff has now indicated that advisers may present such characteristics in advertisements without corresponding net calculations, as long as they disclose the methodology, clearly label the data as gross, and provide total portfolio gross and net performance for proper context.

These updates reinforce the expectation that advisers fully comply with the SEC Marketing Rule. While the FAQ does not alter the rule’s legal requirements, advisers should align their marketing policies and disclosures with this guidance to mitigate compliance risk and avoid regulatory scrutiny.