Gross and net performance presentation controls

Implement the gross and net performance presentation controls requirement by standardizing how you calculate, label, and disclose performance so every marketing piece presents results with the context investors need, and you can prove it in an exam. Build a documented workflow: approved methodologies, mandatory disclosures, pre-use review, and recordkeeping for inputs and approvals.

Key takeaways:

• Treat every performance number as “regulated content” that must be calculated consistently and disclosed with enough context to avoid being misleading. (17 CFR 275.206(4)-1)
• Operationalize with a performance checklist, locked calculation templates, and a documented review/approval trail before distribution. (17 CFR 275.206(4)-1)
• Retain the substantiation file for each presentation (data inputs, calculations, disclosures, approvals, final output) under adviser recordkeeping obligations. (17 CFR 275.204-2)

“Gross vs. net” is where performance marketing breaks in real life: different fee assumptions across slides, stale disclosure blocks, inconsistent benchmarks, and last-minute “one-off” calculations requested by sales. The SEC’s marketing rule framework expects performance to be presented in a way that is not misleading, with required context and disclosures, and supported by records. Your job as a CCO or GRC lead is to convert that expectation into controls that hold up under speed and volume.

This requirement page focuses on the gross and net performance presentation controls requirement: ensuring performance results are presented with required context and disclosures. (17 CFR 275.206(4)-1) The operational goal is simple: any reader should be able to understand what the performance represents, what fees/expenses are reflected (or not), what period is shown, and what assumptions or limitations apply, without needing side emails or “verbal caveats.”

The fastest path to exam-ready execution is a repeatable, evidence-producing process: define approved calculation methodologies, enforce standardized disclosures by performance type, require pre-use compliance review, and keep a complete substantiation package for each use. (17 CFR 275.206(4)-1) Recordkeeping closes the loop; if you cannot recreate the calculation and show who approved it, you are exposed. (17 CFR 275.204-2)

Regulatory text

Regulatory excerpt (provided): “Ensure performance results are presented with required context and disclosures.” (17 CFR 275.206(4)-1)

What the operator must do

You must put controls around performance marketing so that:

1. Performance is not presented in a misleading way because context is missing or unclear. (17 CFR 275.206(4)-1)
2. Disclosures travel with the performance in the same artifact (slide, factsheet, pitchbook, webpage, email attachment) and are not dependent on verbal explanations. (17 CFR 275.206(4)-1)
3. You can substantiate performance claims by retaining inputs, calculation support, and approvals. (17 CFR 275.204-2)

This requirement is intentionally high-level in the provided excerpt. Your control design should therefore be practical and defensible: make your “required context and disclosures” explicit in internal standards, then enforce them through workflow gates and recordkeeping.

Plain-English interpretation (what “gross and net” controls mean)

If you show gross performance (before fees), you must make it clear what “gross” means, what is excluded, and what a client would experience after fees and expenses. If you show net performance (after fees), you must define the fee model used, whether it reflects actual fees charged or a model fee, and what expenses are included. Missing or inconsistent assumptions are how firms end up with misleading performance presentations. (17 CFR 275.206(4)-1)

Think of this as three promises you must keep:

• Consistency: same calculation approach for the same product/strategy across channels.
• Clarity: the reader can tell what is included, excluded, and comparable.
• Proof: you can reproduce the number from retained records. (17 CFR 275.204-2)

Who it applies to (entity and operational context)

In scope entities

• Registered Investment Advisers (RIAs) preparing or approving marketing materials that include performance. (17 CFR 275.206(4)-1)

In scope operational contexts (typical)

• Pitchbooks, factsheets, tear sheets, DDQs, RFPs, one-pagers, websites, investor letters used for marketing, consultant decks, and any presentation with performance tables/graphs.
• Materials created internally or by a third party (placement agent, marketing agency, IR consultant) but distributed by you. If your name is on it, your controls should apply.

What you actually need to do (step-by-step)

Step 1: Create a performance presentation standard (your internal “rulebook”)

Write a short internal standard that defines, at minimum:

• Definitions: “gross” and “net” for your firm, by product type. (17 CFR 275.206(4)-1)
• Fee/expense treatment: which fees are reflected in net, and whether net is actual or model-based. (17 CFR 275.206(4)-1)
• Required context fields: time period, frequency, currency, benchmark rules, inception dates, significant strategy changes, and whether results are hypothetical/backtested if applicable. (17 CFR 275.206(4)-1)
• Disclosure library: approved disclosure blocks mapped to common scenarios (gross only, gross and net, net with model fees, composites, extracted performance, partial periods). (17 CFR 275.206(4)-1)

Output artifact: Performance Presentation Standard (version-controlled).

Step 2: Lock calculation methods into controlled templates

Operationally, errors come from ad hoc spreadsheets. Reduce variance by:

• Using a standard workbook (or performance system export) with protected calculation cells.
• Maintaining a data dictionary for inputs (source system, timing, reconciliation rules).
• Requiring peer review (operations/performance team) for any non-standard calculation.

Output artifacts: controlled templates, data dictionary, calculation methodology memo per strategy.

Step 3: Implement a pre-use review gate for any material containing performance

Build a workflow that routes performance materials through compliance before first use:

• Intake ticket identifies: audience, channel, strategy, performance type (gross/net), time period, and data source.
• Reviewer uses a standardized performance checklist (see below).
• Approval is recorded with version, approver, date, and distribution channel. (17 CFR 275.204-2)

This is where Daydream fits naturally: use Daydream to standardize the checklist, capture reviewer attestations, and retain the substantiation package alongside the final approved file so you can answer exam questions quickly. (17 CFR 275.204-2)

Output artifacts: review ticket, completed checklist, approval record, final approved file.

Step 4: Enforce “disclosures must travel with performance”

Operational rule: no performance chart/table leaves the building without:

• The corresponding disclosure block in the same document, or
• A clearly linked appendix within the same PDF/pack that is distributed together.

Control test: sample recent distributions and verify the disclosure block is present and consistent with the calculation method. (17 CFR 275.206(4)-1)

Step 5: Build a substantiation file for every unique performance presentation

For each pitchbook/factsheet version that includes performance, retain:

• Data extracts or system reports used
• Calculation file (or system output) and notes on assumptions
• Disclosure version used
• Evidence of review and approval
• Final distributed artifact and distribution list (where feasible) This supports both marketing rule expectations and the adviser books-and-records posture. (17 CFR 275.204-2)

Step 6: Monitor drift and retrain

Performance controls degrade as teams copy old decks. Put in place:

• Periodic sampling of active materials for gross/net consistency and disclosure accuracy.
• A feedback loop: if an issue is found, update templates/disclosure library and re-train the content owners. (17 CFR 275.206(4)-1)

Minimum viable performance review checklist (practical)

Use a checklist with hard “stop/go” questions:

1. Is performance labeled clearly as gross or net? (17 CFR 275.206(4)-1)
2. Are fees/expenses included/excluded stated plainly and consistently with the label? (17 CFR 275.206(4)-1)
3. Are time periods clear (start/end dates, frequency) and not selectively presented? (17 CFR 275.206(4)-1)
4. Are benchmarks and comparators described and applied consistently? (17 CFR 275.206(4)-1)
5. Do disclosures match the calculation method and data source for this strategy? (17 CFR 275.206(4)-1)
6. Can the performance be substantiated from retained records? (17 CFR 275.204-2)

Required evidence and artifacts to retain (exam-ready)

Keep these in a single “marketing substantiation package” per material/version:

Artifact	Purpose	Retention driver
Performance Presentation Standard + disclosure library (versioned)	Shows defined expectations and consistency	(17 CFR 275.206(4)-1)
Inputs (data extracts, custodial/performance system reports)	Recreate calculations	(17 CFR 275.204-2)
Calculation support (workbook/system output, assumptions memo)	Substantiation	(17 CFR 275.204-2)
Completed performance checklist	Proves control operation	(17 CFR 275.206(4)-1)
Compliance approval record + final file	Proves pre-use review and what was distributed	(17 CFR 275.204-2)
Exception log (if any)	Shows governance of deviations	(17 CFR 275.206(4)-1)

Common exam/audit questions and hangups

Expect questions that force you to show consistency and proof:

• “Show me how you calculate gross and net for this strategy, and where that methodology is documented.” (17 CFR 275.206(4)-1)
• “Produce support for the numbers in this pitchbook version and show who approved it.” (17 CFR 275.204-2)
• “How do you prevent sales from sending older decks with outdated disclosures?” (17 CFR 275.206(4)-1)
• “Do your third parties (marketing agencies, placement agents) follow the same process?” (17 CFR 275.206(4)-1)

Hangup pattern: firms can produce the final deck but not the calculation support and approval trail. Fix this by treating the substantiation package as a required deliverable, not optional admin. (17 CFR 275.204-2)

Frequent implementation mistakes (and how to avoid them)

1. “Gross” performance shown with vague fee language.
   Avoidance: require explicit disclosure text that states whether advisory fees, fund expenses, and transaction costs are included or excluded, consistent with your internal definitions. (17 CFR 275.206(4)-1)

2. Net performance based on a model fee with no clear explanation.
   Avoidance: the checklist should force the reviewer to confirm the fee basis and that the disclosure matches it. (17 CFR 275.206(4)-1)

3. Multiple calculation methods across channels.
   Avoidance: controlled templates and a single approved methodology memo per strategy. (17 CFR 275.206(4)-1)

4. No evidence of pre-use review for “custom” one-off requests.
   Avoidance: require an intake ticket and approval record for any externally shared performance, even if it’s “just one slide.” (17 CFR 275.204-2)

5. Recordkeeping split across email, Slack, and shared drives.
   Avoidance: centralize in a system of record (Daydream or your GRC/tooling stack) that binds inputs, checklist, approval, and final output. (17 CFR 275.204-2)

Enforcement context and risk implications

No public enforcement cases were provided in the source catalog for this requirement, so this page does not list specific matters. Practically, the risk is twofold:

• Regulatory: performance marketing that lacks context or disclosures can be deemed misleading under the marketing rule framework. (17 CFR 275.206(4)-1)
• Operational: inability to substantiate numbers or approvals creates a records-and-controls failure mode during exams and internal audits. (17 CFR 275.204-2)

Practical execution plan (30/60/90 days)

You asked for speed. Use phases, with deliverables tied to evidence.

First 30 days (stabilize and stop drift)

• Inventory all active marketing materials containing performance across channels.
• Publish a one-page interim rule: “No performance leaves without the checklist + disclosure block + approval record.” (17 CFR 275.206(4)-1)
• Stand up a centralized repository structure for substantiation packages and begin saving new items consistently. (17 CFR 275.204-2)

Next 60 days (standardize)

• Finalize the Performance Presentation Standard and disclosure library; train marketing/IR/sales on what “gross” and “net” mean at your firm. (17 CFR 275.206(4)-1)
• Implement controlled templates and a documented methodology memo per strategy.
• Configure Daydream (or your workflow tool) for intake, checklist completion, approval capture, and attachment of substantiation evidence. (17 CFR 275.204-2)

Next 90 days (prove operation)

• Run a monitoring sample of recently distributed materials: confirm disclosures, labels, and substantiation files exist.
• Create an exception log and remediation playbook for failures (withdraw, correct, retrain, reapprove).
• Prepare an exam “performance binder” index: a simple map from each deck version to its substantiation package and approvals. (17 CFR 275.204-2)

Frequently Asked Questions

Do we have to show both gross and net performance every time?

The operational requirement is that performance is presented with required context and disclosures so it is not misleading. (17 CFR 275.206(4)-1) Your standard should specify when gross-only is permitted and what disclosure must accompany it.

Can marketing create their own spreadsheets if compliance reviews the final deck?

Allowing ad hoc spreadsheets increases inconsistency and makes substantiation harder. Use controlled templates and retain calculation support so you can reproduce the number and show your work. (17 CFR 275.204-2)

What evidence should we keep if performance comes from a third-party administrator?

Retain the third party’s report or extract, your methodology notes for how it was used, the disclosures, and the compliance approval record tied to the final material. (17 CFR 275.204-2)

How do we handle “custom” performance requests from prospects?

Route them through the same intake and checklist process as standard materials and retain the substantiation package. The fact that it is bespoke does not reduce the need for context, disclosures, or records. (17 CFR 275.206(4)-1); (17 CFR 275.204-2)

Our team updates performance monthly. Do we need a new approval each time?

Treat each externally distributed version as a distinct item that needs documented review and approval, even if the template is the same. Retain the approval record and the inputs supporting that period’s update. (17 CFR 275.204-2)

What’s the quickest way to get exam-ready without rebuilding everything?

Start by enforcing the checklist + disclosure block + approval record for any new distribution, then backfill substantiation packages for the materials you actively use. Centralizing this workflow in Daydream reduces missed approvals and missing evidence. (17 CFR 275.204-2)