•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

By: Jim Van Horn, Seyfarth Shaw LLP

On January 11, the staff of the SEC's Division of Investment Management released new guidance with respect to the current version of Rule 206(4)-1, adopted under the U.S. Investment Advisers Act of 1940 and amended in late 2020. This new guidance, which came in the form of an update to the Staff's FAQs for the Marketing Rule, appears to require private fund sponsors to include "net performance" with any presentation of a subset of an investment portfolio, including "deal-by-deal" returns or "deal studies." This interpretation is a departure from how many industry participants thought the Marketing Rule would apply to individual investment-level presentations and will require sponsors to consider how to provide such information going forward and whether providing it with gross performance on an investment-level basis is still practical.

Net Performance Requirement for Individual Investment Presentation

The Marketing Rule prohibits any presentation in an advertisement (broadly defined) of gross performance unless the advertisement also includes a presentation of "net performance." Gross performance is defined as performance results "before the deduction of all fees and expenses that a client or investor has paid or would have paid in connection with the investment adviser's advisory services to the relevant portfolio." According to the Marketing Rule, where performance results are provided for a subset of investments of a por......................

To view our full article Click here