In the fast-evolving world of investment management, clear and compliant marketing is essential. On March 19, 2025, the SEC’s Division of Investment Management Staff issued updated guidance clarifying presentation requirements under the Marketing Rule, especially around extracted performance data and portfolio characteristics. This update provides investment advisers with more flexibility — but also new compliance considerations — when crafting marketing materials. 

Let’s explore what these updated FAQs mean, how they change prior requirements, and why investment advisers should pay close attention. 

Rethinking Extracted Performance Presentations 

Previously, advisers were required to present both gross and net performance side-by-side whenever showcasing the performance of a single investment or a subset (an “extract”) of a larger portfolio. This could be operationally burdensome, especially when net figures were difficult to isolate. 

What’s New in 2025? 

The SEC’s revised guidance now permits advisers to show only gross extracted performance without the corresponding net figure, if certain conditions are met: 

• The extracted performance must be clearly tagged as gross performance, explicitly disclosed as not net of fees and expenses. 

• The marketing materials must prominently present the total portfolio’s gross and net performance for the same time period as the extracted data, earlier in the document. 

This approach allows advisers to spotlight attractive components of a portfolio while maintaining transparent context with the full portfolio’s overall results.

Clarifying Portfolio and Investment Characteristics 

There’s often confusion about whether metrics like yield, volatility, or the Sharpe ratio count as “performance” under the Marketing Rule. 

The SEC staff stopped short of definitively classifying these as performance figures but offered helpful guidance: 

• These portfolio characteristics can generally be presented on a gross-only basis without corresponding net disclosures. 

• When doing so, advisers must ensure clear and balanced presentation by including total portfolio gross and net performance elsewhere in marketing materials. 

Unlike clear performance measures such as total return or internal rate of return, characteristics like yield and sector returns are considered less likely to mislead if disclosed gross-only, offering advisers more flexibility in showcasing investment attributes. 

Compliance Considerations: Staying on the Right Side of the Rules 

Even with this additional flexibility, marketing materials remain subject to the general prohibitions against misleading statements under Rule 206(4)-1(a) and Sections 206(1) and 206(2) of the Advisers Act. 

Advisers should: 

• Review and update Marketing Rule policies and procedures to reflect the new guidance. 

• Consider reorganizing presentations to ensure gross-only extracted performance and characteristics are supplemented appropriately by total portfolio performance disclosures. 

• Maintain vigilance to avoid any misleading implications or omissions. 

Why This Update Matters for Investment Advisers 

This SEC update translates into several practical benefits: 

• Reduced compliance burden by eliminating the need to calculate and present net returns for every single portfolio extract or characteristic. 

• Greater marketing flexibility to highlight key investment features like yield or volatility without complicated net disclosures. 

• Streamlined client communications through clearer, more concise presentations. 

At the same time, advisers must balance this flexibility with rigorous adherence to anti-fraud provisions and thoughtful disclosure design. 

Conclusion 

The SEC’s updated Marketing Rule FAQs provide welcome clarity and operational relief for investment advisers. By allowing gross-only presentations of extracted performance and certain portfolio characteristics—when coupled with transparent full portfolio disclosures—advisers can streamline marketing efforts while maintaining investor protections. 

That said, this change underscores the ongoing importance of carefully reviewing marketing strategies and compliance programs to ensure communications remain fair, clear, and fully compliant. 

Stay ahead of the curve by revising your marketing materials with these SEC updates in mind—embrace clarity and compliance hand-in-hand! 

Download the complete First Quarter 2025 Regulatory Update today to find out more.