{"id":1411,"date":"2025-03-21T15:17:00","date_gmt":"2025-03-21T15:17:00","guid":{"rendered":"https:\/\/iqeq.com\/us\/insights\/sec-marketing-rule-faq-update-clarifies-gross-net-performance-requirements\/"},"modified":"2025-04-16T08:32:14","modified_gmt":"2025-04-16T08:32:14","slug":"sec-marketing-rule-faq-update-clarifies-gross-net-performance-requirements","status":"publish","type":"post","link":"https:\/\/iqeq.com\/us\/insights\/sec-marketing-rule-faq-update-clarifies-gross-net-performance-requirements\/","title":{"rendered":"SEC Marketing Rule FAQ update clarifies gross\/net performance requirements"},"content":{"rendered":"
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By Alyssa Barcheers, Managing Director, U.S.<\/em><\/p>\n

The U.S. Securities and Exchange Commission (SEC)\u2019s new Marketing Rule revolutionized the marketing framework for investment advisers subject to the Advisers Act. It transformed decades of rules, guidance and no-action letters into a single rule intended to reflect modern developments and regulatory changes since the initial Advertising Rule of 1961.<\/p>\n

Since the new rule took effect in November 2022, however, one provision has notoriously stood out as causing confusion, uncertainty and frustration across the industry: the prohibition against displaying gross performance without accompanying net performance.<\/p>\n

Questions emerged almost immediately. Does this apply if I am showing performance at the investment level? What if I\u2019m not charging fees and expenses at that level? How can we calculate this metric without being misleading?<\/p>\n

The SEC sought to clarify this point in a January 2023 FAQ update stating that advisers are<\/em> required to include the net performance of a single investment when the adviser displays the gross performance of that investment. While the update provided clarity, it did not cure the confusion or frustration, as advisers continued to struggle with how this metric should be calculated.<\/p>\n

But now, investment professionals can finally breathe a sigh of relief. On March 19, 2025, the Division of Investment Management at the SEC released an FAQ stating, among other things, that advisers are permitted to use gross performance metrics at the investment level (\u201cextracted performance\u201d) in their marketing materials without<\/em> an accompanying net performance metric as long as<\/em> they prominently display the gross and net performance of the total portfolio.<\/p>\n

Specifically, the FAQ indicated that the SEC would not recommend enforcement action when an adviser displays the gross performance of an extract in an advertisement without including corresponding net performance if the following criteria are all met:<\/p>\n