What is the SEC marketing rule?

The SEC adopted it on December 22, 2020, replacing the old advertising and cash solicitation rules, and advisers had to comply by November 4, 2022. It bars advertisements with untrue statements of material fact, claims the adviser cannot back up, or benefits shown without fair mention of material risks. Paid promoters face disclosure and oversight conditions. Performance of funds other than private funds has to be shown for 1-, 5- and 10-year periods.

Say a pitch deck shows a fund’s gross return of 20% a year. Under the rule, the deck must also show the net return after fees, say 15% a year. Simple example. Terms vary by fund.

It shapes the performance figures and claims investors see in fund marketing, for instance by requiring net returns wherever gross returns are shown.