Practice Management

SEC issues marketing rule guidance on gross performance

Sam Bojarski / Mar 20, 2025
The Commission said RIAs have some leeway with enforcement when it comes to showing extracted performance and certain investment characteristics, like Sharpe ratios.
In new guidance, the Securities and Exchange Commission (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 information comes from the first of two FAQs the SEC published on the marketing rule, which took effect for RIAs in late 2022. SEC investment management division director Natasha Greiner alluded to the publication of the FAQs in public remarks earlier this...
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