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Vedder Thinking | Articles SEC Staff Issues Update to Marketing Rule FAQs


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On February 6, 2024, the staff of the SEC’s Division of Investment Management issued an update to its frequently asked questions (FAQs) guidance related to the Marketing Rule (Rule 206(4)-1 under the Investment Advisers Act of 1940). The update added a new FAQ related to the calculation and presentation of gross and net performance in an adviser’s advertisement, as summarized below.

The Marketing Rule requires that any presentation of a private fund’s gross performance in an advertisement must be coupled with an equally prominent presentation of net performance calculated over the same time period and using the same type of return and methodology to facilitate comparison between the gross and net performance.

In the new FAQ, the staff took the position that, under the Marketing Rule, adviser advertisements cannot present a private fund’s gross internal rate of return (IRR) calculated without the impact of fund borrowing alongside the fund’s net IRR calculated with the impact of fund borrowing. The staff noted that such a presentation would also result in IRR calculations across different time periods, with a gross IRR calculation beginning when a fund initially uses borrowings to acquire investments and a net IRR calculation beginning once capital has been called to repay the borrowings. The staff also expressed its view that it would be a violation of certain general prohibitions of the Marketing Rule to present only a fund’s net IRR calculated with the impact of fund borrowing without also showing either (1) comparable net IRR calculated without the impact of fund borrowing or (2) appropriate disclosure describing the impact of fund borrowing on the net IRR shown.

The full list of the SEC staff’s FAQs related to the Marketing Rule is available here.

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Mark A. Quade


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Jacob C. Tiedt


Jake W. Wiesen