By Lisa Ward, Director of Marketing Review and Matt Giggey, Director, Compliance Services

As part of a sweep conducted by the Securities and Exchange Commission, charges were brought against nine registered investment advisers for advertising hypothetical performance to the general public on their websites without adopting and/or implementing policies and procedures required by the Marketing Rule.  Two of the nine advisors also failed to maintain the required copies of their advertisements.  All nine firms settled charges and paid civil penalties ranging from $50,000 to $175,000.


  • Advisors must adopt policies and procedures for the use of hypothetical performance that are in-line with the new marketing rule (206(4)-1 of the Advisers Act). The marketing rule allows for hypothetical performance to be shown to a narrow audience as opposed to mass marketed on a website or other mass marketing platform. The policies and procedures must state what types of client are eligible to see hypothetical performance. These clients must be able to understand the risks involved in hypothetical performance.
  • Advisors must retain copies of their advertisements under the Books and Records Rule (204-2 of the Advisers Act). All advertisements need to be archived along with the distribution list for the  particular piece.  Also, all iterations of a website need to be archived.
  • Hypothetical performance may have “attention grabbing power” this is why it is important that the material is relevant to the investment objectives of the client. Posting hypothetical performance on the Adviser’s website in a one size fits all approach may not be relevant for all An advisor can’t control who will see the website and therefore doesn’t know the background of the investor.  When marketing hypothetical performance to an intended audience, additional requirements in way of disclosures need to be met, such as the criteria and assumptions used to make the hypothetical performance;  and the risks and limitations of using the hypothetical performance.

Details of the SEC’s press release can be found here:

SEC Sweep into Marketing Rule Violations Results in Charges Against Nine Investment Advisers (9/11/23)