SEC Marketing Rule
The US rule governing how registered advisers advertise, including how they show performance.
It requires fair and balanced presentation, net performance shown alongside gross, standard time periods, and limits on hypothetical performance and on testimonials or endorsements without disclosures. Track record slides in a deck are advertisements.
The rule, Rule 206(4)-1 under the Investment Advisers Act, applies to SEC-registered investment advisers. It requires net performance to be shown with at least equal prominence to gross, prohibits cherry-picking, sets conditions for extracted performance from a subset of investments, and requires policies before showing hypothetical or projected returns.
Exempt reporting advisers are not subject to the rule itself, but anti-fraud rules still apply to everything they say to investors. In practice many emerging managers follow the rule's standards anyway because institutional LPs expect it.
Worked example
A registered adviser's deck shows the gross IRR of its three best deals. Under the rule, that is extracted performance: the deck must also offer or show the performance of the full portfolio, and net figures must appear with equal prominence. The compliance team adds a slide with all 20 deals and the fund's net returns.
Common questions about SEC Marketing Rule
Does the SEC Marketing Rule apply to venture capital funds?
It applies to SEC-registered advisers. Many venture managers are exempt reporting advisers, who are not directly subject to it but remain bound by anti-fraud rules, so most still follow its standards.
Can I show gross returns in my fund deck?
Yes, but a registered adviser must show net returns alongside with at least equal prominence and calculated over the same period. Gross figures alone are not permitted.