Summary of SEC’s updated marketing rule FAQ

Summary and Takeaways:

1. Investment advisers may not comply with only part of the marketing rule prior to the implementation date – This answer addresses ONLY conduct occurring prior to the rule’s November 4, 2022 implementation deadline and therefore is currently moot.
2. Investment advisers have one month after the closing of a year to comply with the 1-, 5- and 10- year time requirements under the rule – For non-private fund performance, advisers must display 1-, 5-, and 10- year performance; however, yearend performance is not always readily available after the closing of a year.  The FAQ states that using third-quarter performance for the purposes of the time period requirement will be acceptable for one month after the close of the year.
3. Net performance is required for case studies, performance tables, and single investment extractions – The FAQ identifies single investments as fitting the definition of “Extracted Performance” under the rule.  Therefore, if gross performance is displayed for a single investment (e.g., either a case study or a table), net performance would be required to be displayed alongside it, with equal prominence.