SEC Issues New Guidance on Marketing Rule 

The Securities and Exchange Commission (SEC) has released updated guidance on its revised marketing rule, addressing industry calls for clearer directives. Originally enacted in 2020 and effective as of November 2022, the rule lifted the previous ban on paid and unpaid testimonials and endorsements. However, it introduced stricter guidelines for performance reporting and enhanced disclosure obligations. 

In FAQ release last week, the SEC tackled several ambiguous points. It clarified that advisors must fully comply with the amended rule without picking and choosing provisions. On the other hand, it granted flexibility by allowing a one-month window after the calendar year ends to compute one-, five-, and ten-year performance figures, rather than requiring immediate calculations. 

The agency also permitted registered investment advisory (RIA) firms to showcase only gross performance for specific periods—omitting net performance—if certain conditions are met. Additionally, the FAQ signaled leniency toward advisors presenting gross characteristics (without subtracting fees and expenses), provided this is transparently disclosed and other presentation criteria are satisfied. 

However, the SEC emphasized consistency: when advertisements feature both gross and net performance, RIAs must apply identical methodologies and timeframes for both. 

In 2023, the SEC launched a focused enforcement sweep targeting violations of the updated marketing rule, resulting in fines totaling hundreds of thousands of dollars levied against noncompliant RIAs. 

Earlier this month, the Investment Adviser Association expressed optimism about the forthcoming SEC guidance. It noted that clarity—especially on presenting gross and net performance, as well as portfolio details like yield in marketing—would “would remove impediments to advisers sharing important information with investors and reduce the risk of investor confusion.”