SEC reminds investment advisers of rule requirements with new compliance targets

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The SEC has issued a release reminding advisers of the importance of complying with the new marketing rule while answering some of the common questions.

The SEC’s new marketing rule went into effect on November 4th, 2022 and made significant changes to the requirements around performance advertising. The Commission recently updated their marketing rule FAQ to include some common questions they have received around using performance data.

The SEC has been asked for clarification regarding the new one, five, and ten-year reporting obligations, around how they’re expected to comply if they are unable to calculate the necessary data immediately following the end of the year. The SEC has now stated that a firm could use interim performance while the new data was being calculated, provided that the data was updated in a reasonable time, which they believe to be no longer than one month.

The Commission also addressed questions on the equal prominence of gross versus net performance, another new requirement under the updated rule. Advisers were reminded that net and gross performance must be displayed in equal prominence, including when referring to extracted subsets of funds or investments. Generally speaking, if a marketing material is using gross performance in any way, it should also have net performance displayed for that same investment or fund.

There’s been renewed focus by the SEC on investment adviser marketing, providing investment advisers with a preview of their compliance targets for the year.

How we can help

Our specialist team can help you navigate these new regulatory challenges by designing and implementing regulatory change programs that fit your specific needs. We can also support your ongoing compliance and work with you to develop risk assessments and compliance monitoring programs to make sure your framework is robust.

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