SEC issues marketing rule guidance on gross performance
The SEC issues marketing rule guidance on gross performance. In this new guidance, the SEC said it would not recommend enforcement actions against advisors who advertise the gross performance of an investment within a portfolio, if they meet certain requirements.
The guidance published by the SEC in the form of frequently asked questions (FAQs) shows that advisors governed by the rule must clearly identify such ‘extracted performance’ as gross performance and display the total portfolio’s gross and net performance in any advertisements.
Performance of the total portfolio must be displayed with equal prominence to extracted performance and should be calculated over a time period that includes the period of the extracted performance, according to the SEC’s guidance.
‘The second FAQ relates to the advertising of portfolio or investment “characteristics”, such as yield, coupon rate, volatility, Sharpe ratio, and other similar metrics,’ Cynthia Kelly, senior compliance consultant at STP Investment Services, said in a statement. ‘Both FAQs address advertising gross and net performance and permit advisers to advertise extracted performance and the performance of characteristics on a gross basis without requiring accompanying net performance only if certain criteria are met.’
Read more on what Cynthia had to say in Citywire here.
