What the Marketing Rule Covers
The Marketing Rule (Rule 206(4)‑1) is part of the Investment Advisers Act of 1940 and governs how SEC‑registered investment advisers can advertise and market their services and performance. Its goal is to protect investors by making sure performance results and claims are clear, fair, and not misleading. (SEC)
The new FAQs (Frequently Asked Questions) update official staff guidance on the rule — offering greater clarity and flexibility for advisers on how they can present certain performance data and other marketing claims without running afoul of the Commission’s compliance expectations. (National Law Review)
Key Changes in the New SEC FAQs (January 15 2026)
No “Hard Rule” on Model Fees vs. Actual Fees
- Previously, some advisers interpreted the rule as requiring model fees (standard hypothetical fee calculations) if real fees for the target audience were higher — even when actual net performance might be more favorable.
- The new FAQs clarify that there is no per se prohibition on using actual net performance where relevant, as long as the presentation is fair, not misleading, and appropriately disclosed.
- This gives advisers more flexibility in how they show performance, especially when actual client fees differ from model fees. (National Law Review)
Why it matters:
This helps reduce confusion and allows advisers to tailor performance presentations more closely to real client outcomes, easing compliance burdens where strict interpretations previously made compliance difficult. (National Law Review)
Flexibility on “Extracted Performance” & Performance Metrics
- The Marketing Rule requires that gross performance (pre‑fee) be paired with net performance (after fees) to avoid misleading investors.
- Under the updated FAQs, advisers may present certain extracted performance (e.g., the performance of a specific investment or group of investments) without also showing the net numbers, if certain conditions are met:
- The extracted performance must be clearly identified as gross performance.
- The total portfolio’s gross and net performance must also be presented in advertising with equal prominence.
- The performance period used for the portfolio must encompass the entire period of the extracted performance.
- Additionally, advisers may present some performance‑related characteristics (like yield, contribution to return, volatility, Sharpe ratio, etc.) on a gross basis under similar conditions, even if they’re unclear whether these are strictly “performance” under the rule. (hklaw.com)
Why it matters:
This provides much‑needed practical flexibility, especially for private fund managers and others who struggled with calculating and presenting net performance for small subsets of investments. It reduces the need to always show net performance for every statistic advertisers want to highlight, if done responsibly. (hklaw.com)
Testimonials & Endorsements Clarified
- In addition to performance presentation, the SEC confirmed that testimonials and endorsements from individuals without disqualifying events can be used, even if the regulatory order came from a self‑regulatory organization (like FINRA) and didn’t include a bar, suspension, or prohibition.
- This expands on the Marketing Rule’s existing approach to endorsements, adding clarity about what kinds of disciplinary histories don’t automatically bar someone from giving compensated testimonials. (National Law Review)
Why it matters:
This clarification gives advisers and marketers greater confidence when using testimonials or endorsements in marketing materials — as long as conditions and disclosures are appropriate. (National Law Review)
Why the New FAQs Are Significant
Greater Practical Flexibility
The new guidance reflects the SEC staff’s willingness to interpret the Marketing Rule flexibly, provided advisers stick to the law’s anti‑fraud and transparency principles. (National Law Review)
This is especially important for:
- Private fund managers who want to highlight specific performance characteristics without violating the rule. (hklaw.com)
- Advisers dealing with fee variability, where strict interpretations of prior guidance made straightforward advertising awkward or potentially non‑compliant. (National Law Review)
Industry Reaction & Compliance Considerations
Adviser Compliance Teams
Legal and compliance professionals have welcomed the new FAQs as helpful and clarifying, especially the flexibility around gross vs. net performance presentations. Many see this as a practical way to meet marketing objectives without undermining investor protections. (www.hoganlovells.com)
However, the FAQs do not change the underlying law — they interpret it. That means:
- Advisers still need to ensure full, accurate, and non‑misleading disclosures. (SEC)
- Compliance programs need to update marketing materials and related policies to align with the new interpretation. (Vedder)
Ongoing Enforcement Expectations
The SEC has made clear that, while FAQs provide interpretive relief, staff can still examine and enforce compliance based on all facts and circumstances. Clear disclosures and transparent comparisons remain essential. (SEC)
Key Takeaways
| Topic | What’s Changed |
|---|---|
| Net vs. Model Fees | Advisers may use actual net performance with appropriate disclosure rather than always relying on model fees. (National Law Review) |
| Performance Presentation | Extracted performance & certain metrics can sometimes be shown gross only, with conditions. (hklaw.com) |
| Testimonials/Endorsements | Clarified that certain self‑regulatory disciplinary histories aren’t disqualifying. (National Law Review) |
| Ongoing Compliance | FAQs offer guidance but don’t change the law; advisers must still ensure disclosures are appropriate. (SEC) |
Why This Matters for Investors
While these FAQs mainly affect investment adviser marketing practices, they indirectly benefit investors by:
- Making performance information clearer and more relevant. (hklaw.com)
- Reducing confusion about how results and metrics are presented. (www.hoganlovells.com)
- Enhancing transparency around testimonials and endorsements. (National Law Review)
Here’s a case‑study–style breakdown of the SEC’s new FAQs offering greater flexibility under the Marketing Rule (Rule 206(4)‑1) — including specific examples (case studies) and comments from the industry and professionals about the guidance and its impact:
Case Study 1 — Extracted Performance Flexibility
What the SEC Changed
Under prior FAQ guidance on the Marketing Rule, advisers couldn’t present raw performance of a single investment or subset of investments (“extracted performance”) without showing corresponding net performance — which made practical use of case studies difficult. (SEC)
The new FAQs (updated Jan. 15 2026) clarify that the SEC staff will not recommend enforcement action if an adviser shows gross performance for an extract without accompanying net performance provided certain conditions are met, such as:
- Clearly labelling extracted performance as gross only, and
- Presenting the total portfolio’s gross and net performance with equal prominence alongside the extract. (dwt.com)
This “case study” change means advisers can highlight individual investments or strategies in marketing materials in a more intuitive way, without automatically having to compute net extracted returns that might be impossible or materially misleading. (SEC)
Case Study 2 — Portfolio or Investment Characteristics
Background
There was once confusion over whether certain portfolio metrics — like yield, volatility, contribution to return, or Sharpe ratios — should be treated as “performance” under the rule (which would require both gross and net versions). (SEC)
What the FAQs Allow
Under the new FAQs, these characteristics can sometimes be presented on a gross basis alone in advertising without corresponding net data, if the adviser also displays the total portfolio’s gross and net performance with equal treatment. (hklaw.com)
Example scenario: An adviser preparing a pitch deck might want to show gross contribution to return for a particular sector in a private fund case study. Under the original strict reading, this would have required net data — which can be complex and confusing. The updated FAQ allows this if total portfolio net metrics are included and clearly labelled. (dwt.com)
Industry & Professional Comments
Adviser Compliance Teams
Many compliance professionals saw these updated FAQs as a practical improvement that removes some “roadblocks” to good marketing practice:
- Reduced operational burden: Advisers no longer have to compute net performance for every tiny subset or metric, which was often impractical or misleading when fee allocation across investments is complex. (hklaw.com)
- Case studies become usable: The ability to use isolated investment case studies with gross performance simplifies storytelling in marketing brochures or pitch decks without automatically triggering net performance requirements for each example. (dwt.com)
These comments generally reflect relief rather than controversy, because the FAQs still emphasize fair and balanced presentation (e.g., neither hiding fees nor misleading investors). (SEC)
Real‑World Examples Commented by Legal Advisors
Comment by Regulatory Attorneys
Legal advisers have publicly remarked that this represents an interpretive shift from earlier FAQ interpretations that seemed rigid about net‑only presentations for extracted performance:
“The SEC staff reversed its earlier approach and now provides the necessary conditions under which gross‑only extracted performance and certain characteristics may be shown without net metrics.” (Mayer Brown)
This kind of commentary suggests that the FAQs are not loosening investor protection but rather offering practical compliance clarity — something the industry had asked for since the Marketing Rule was fully adopted. (Mayer Brown)
Key Themes from Comments & Case Studies
1. Greater Practical Flexibility in Marketing Materials
The FAQs reflect the reality that advisers need to use case studies, specific investment examples, and portfolio metrics in promotional materials — and it’s unrealistic to show a matched net metric for every piece of that content. (hklaw.com)
2. Still Rooted in Transparency
The SEC staff hasn’t changed the rule itself, and the FAQs explicitly do not alter legal obligations — they clarify how the rule may be interpreted in practice. (SEC)
3. Evidence of Regulatory Evolution
These FAQs are one more example of how long‑standing principles (like fair, balanced, non‑misleading marketing) are being blended with real‑world needs (e.g., case studies and characteristic metrics) in a way that professionals find more workable. (dwt.com)
Summary (Quick Reference)
| Focus Area | Old Interpretation | New FAQ Flexibility |
|---|---|---|
| Extracted performance in adverts | Required net performance for each extract | Gross extracted performance allowed if total portfolio gross & net shown equally (dwt.com) |
| Portfolio characteristics (e.g., yield) | Treated as performance requiring net equivalent | Can be shown gross alone with disclosure and total portfolio net/gross (hklaw.com) |
| Net vs. model fee presentation | Some interpreted as requiring model fees when anticipated fees differ | Clarified that actual net performance can be used with clear disclosure (National Law Review) |
Final Takeaway
The SEC’s updated FAQs on the Marketing Rule don’t rewrite the rule — but they provide advisers much‑needed clarity and real‑world flexibility about how to use case studies, specific investment examples, and portfolio metrics in compliant marketing materials, without sacrificing core investor protections. (SEC)