On March 19, 2025, the SEC Division of Investment Management added to its Marketing Rule Frequently Asked Questions (FAQ). The publication includes new guidance related to the presentation of extracted performance and certain portfolio investment characteristics. One of the added responses reverses a position that was previously taken by SEC staff and should result in a more reasonable approach to applying the full and fair disclosure principles that the rule was intended to establish. The updates are summarized below.

Extracted Performance: In this updated FAQ response, the SEC noted that they would not object if an adviser presents extracted performance of one investment or a group of investments from a private fund or portfolio on a gross basis without providing corresponding net performance if the adviser abides by specific guidelines including: (i) clearly identifying gross performance, (ii) including total fund or portfolio gross and net performance, (iii) presenting the information with equal prominence, and (iv) providing the information over a consistent and disclosed time period.

Portfolio Investment Characteristics: In this new FAQ response, the SEC acknowledged that it is unclear whether certain portfolio and investment characteristics (yield, coupon rate, contribution to return, etc.) should be treated as “performance” requiring reporting on a gross and net basis. The SEC confirmed that it would not object to the presentation of one or more gross characteristics of a portfolio or investment without providing a corresponding net characteristic, so long as the adviser follows the same stipulations for extracted performance.