A lesser-discussed aspect of the new SEC marketing rule reignites an old debate—how can an advisor tout their own investment track record after leaving a firm?
Much of the focus on the Securities and Exchange Commission’s new marketing rule, which takes effect in November 2022, centers on the fact that investment advisors can now use testimonials and endorsements in advertising—under certain conditions.
But tucked away in the 430-page final rule is a section addressing a longtime debate in advisor circles—who “owns” an advisor’s investment performance, and are they allowed to market themselves or their new firm by touting that track record?
For many years, lawyers and investment managers have relied on a series of no-action letters to provide guidance on the so-called “portability” rule, resulting in a sometimes confusing legal gray zone. The SEC’s new marketing rule is meant to finally codify that guidance.
In short, the rule outlines four requirements investment advisors must meet in order to use the investment performance in previous firms in marketing and advertising materials: The advisor (or advisors) primarily responsible for the prior performance
manage the accounts at the new firm; those new accounts are similar enough to the old ones so the results contain relevant information to the investors; the performance of all accounts that were managed in a similar way is advertised (unless the exclusion of some accounts does not materially improve the overall results —...
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