Investment Performance Claims and Substantiation

The investment performance claims and substantiation requirement means every performance statement in your advertising must be true, not misleading, and supported by documentation you can produce promptly in an SEC exam. Operationalize it by forcing claim-by-claim substantiation at pre-approval, locking the final ad and disclosures in an immutable archive, and testing across channels for drift and inconsistency. (17 CFR 275.206(4)-1)

Key takeaways:

• Treat each performance claim as a “ticket” that must link to a calculation file, source data, and the exact disclosure language approved for that use.
• Build a repeatable workflow: intake → classify “advertisement” → substantiate → review/approve → archive → monitor.
• Expect exam focus on Marketing Rule compliance and your ability to evidence supervision. (2025-exam-priorities)

Performance advertising is one of the fastest ways to create exam risk because small wording choices can turn a technically “accurate” number into a misleading message. Under the SEC Marketing Rule’s general prohibitions, an adviser commits a fraudulent, deceptive, or manipulative act by disseminating an advertisement that includes an untrue statement of a material fact, or that is otherwise false or misleading. (17 CFR 275.206(4)-1)

For a CCO or GRC lead, the operational problem is rarely “how do we calculate performance?” The problem is control: making sure every channel, every version, and every downstream reuse of a chart, pitch deck slide, fact sheet, website snippet, or social post remains tied to support, context, and required caveats. Your implementation has to work at scale, under deadline pressure, and across marketing, IR/sales, portfolio teams, and third parties like placement agents or designers.

The SEC has stated it will focus on compliance with recently adopted SEC rules including the Marketing Rule in its exam program. (2025-exam-priorities) That makes documentation quality, supervision, and repeatability just as important as the math.

Regulatory text

Operator requirement (what the rule says you must avoid):
“It shall constitute a fraudulent, deceptive, or manipulative act, practice, or course of business within the meaning of section 206(4) of the Act for any investment adviser to disseminate any advertisement that includes any untrue statement of a material fact, or that is otherwise false or misleading.” (17 CFR 275.206(4)-1)

What you must do in practice:
You must ensure every investment performance claim in an advertisement is (1) factually accurate, (2) presented in a way that is not misleading, and (3) backed by supporting records you can produce. This includes performance numbers, comparisons, rankings, charts, “since inception” claims, risk statements paired with returns, and any implied claim about repeatability or skill that the presentation could convey.

Plain-English interpretation (requirement-level)

If marketing says it, you must be able to prove it, and the presentation cannot create a false takeaway. “False or misleading” is broader than “wrong number.” A correct return can still be misleading if:

• the time period is cherry-picked,
• fees are omitted or inconsistently applied,
• benchmarks are selected or described in a confusing way,
• performance is presented without context about volatility, drawdowns, or strategy constraints,
• the formatting emphasizes favorable results while burying relevant limitations.

Your job is to design controls so the firm cannot publish performance content unless (a) the claim is substantiated and (b) the final distribution package (content + disclosures) is archived and traceable.

Who it applies to (entity and operational context)

Applies to: Registered Investment Advisers producing or disseminating “advertisements” that include performance information. (17 CFR 275.206(4)-1)

Operationally, this touches:

• Marketing and communications (website, pitch decks, fact sheets, social media, emails)
• Sales/IR and client-facing teams (RFPs, DDQs, one-pagers, webinars)
• Portfolio/analytics (performance calculation, composites, benchmarks)
• Compliance (pre-review, approval evidence, recordkeeping)
• Third parties acting for you (placement agents, PR firms, designers, lead-gen firms) when they disseminate or help draft content that includes your performance claims

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

1) Define “performance claim” and “advertisement” for intake

Create a short intake checklist used by marketing and sales that flags:

• any numeric return, CAGR, IRR, multiple, yield, drawdown, volatility, Sharpe, hit rate
• “since inception,” “annualized,” “net of fees,” “gross of fees,” “model,” “backtested”
• comparisons (benchmark, peer group, ranking, “top quartile”)
• hypothetical or projected outputs (including model portfolio returns)

Outcome: content is routed into the performance-claim workflow before it goes out.

2) Implement claim-by-claim substantiation (the “claim ticket”)

Require each distinct claim to have a substantiation reference before compliance approval. A workable structure:

Claim ticket fields (minimum):

• Claim text exactly as it will appear (copy/paste)
• Location (slide/page/URL section; version number)
• Claim type (actual, extracted, benchmark-relative, hypothetical)
• Calculation owner (name/team)
• Source data location (portfolio system report, accounting output, spreadsheet)
• Calculation file and methodology memo (how calculated; assumptions; fee treatment)
• Disclosure package ID (the exact disclaimers/risk language to accompany the claim)
• Reviewer and approval timestamps

This is the control that turns “we checked it” into “we can prove we checked it.”

3) Standardize calculation and disclosure rules (so reviewers aren’t guessing)

Write a short internal standard that answers, consistently:

• When to show gross vs net (and how you label it)
• Fee assumptions and whether they are uniform across materials
• Treatment of cash, leverage, derivatives, and allocations
• Benchmark selection criteria and naming conventions
• Rounding rules and materiality thresholds for updates/corrections
• Required contextual disclosures for each claim type (e.g., time period, data source, fee basis, limitations)

Keep it operational. You want fewer debates in review meetings and fewer “one-off” slide edits.

4) Pre-dissemination compliance approval with substantiation links

Set a hard rule: no dissemination until compliance has:

• reviewed the final formatted piece (not just draft text),
• verified every performance claim has a claim ticket,
• confirmed the right disclosure version is attached,
• checked that headings, footnotes, and visuals do not create misleading emphasis.

This matches the best-practice control: pre-dissemination compliance approval with explicit claim-by-claim substantiation references.

5) Archive the “final as sent,” plus the approval and disclosure versions

Keep an immutable record of:

• final disseminated communication (PDF, screenshot, HTML export, video recording where relevant)
• approval record (who approved, when, what version)
• claim tickets and substantiation package
• disclosure language version used (and where it appears)

Immutability matters because exams often test whether your archived version matches what clients actually saw. This aligns to the best-practice control: maintain immutable archives of final disseminated communications, approval records, and linked disclosure versions.

6) Cross-channel sampling and drift testing (catch re-use and copy/paste risk)

Set a periodic test across channels:

• pick samples from website pages, recent pitch decks, email campaigns, and social posts
• verify the same claim is presented consistently with the same calculation basis and disclosures
• log exceptions and remediation (what changed, who fixed it, re-approval evidence)

This aligns to the best-practice control: periodic cross-channel sampling to detect inconsistent claims, disclosures, or risk language and log remediation.

7) Manage third parties who create or distribute performance content

Add contract and workflow hooks:

• require pre-use compliance review for any third-party-created material containing performance
• require the third party to route drafts through your approval tool
• ban “shadow edits” post-approval (formatting changes can remove footnotes or alter emphasis)

Required evidence and artifacts to retain

Use this as your exam-ready retention checklist:

• Inventory of advertisements that include performance content (channel, owner, dates)
• Claim tickets (one per performance claim) with links to support
• Source data exports (system reports, custodial/accounting statements as applicable)
• Calculation workpapers (spreadsheets, code, queries) and a short methodology memo
• Benchmark support (benchmark definition, source, and why it is appropriate for the claim being made)
• Disclosure library with version control and mappings (claim type → required disclosures)
• Pre-approval records (review notes, redlines, approvals, exceptions)
• Immutable archive of final disseminated versions and the distribution list or channel evidence
• Monitoring/testing logs (sampling results, issues found, remediation approvals)
• Training records for marketing and client-facing staff on the workflow

Common exam/audit questions and hangups

Expect questions that test whether your process is real and repeatable:

• “Show me substantiation for this specific claim on your website.” (17 CFR 275.206(4)-1)
• “How do you prevent outdated performance from staying live?” (17 CFR 275.206(4)-1)
• “Who can approve ads, and what evidence shows the review happened before posting?” (17 CFR 275.206(4)-1)
• “How do you ensure disclosures travel with the claim across channels?” (17 CFR 275.206(4)-1)
• “What testing do you perform to confirm marketing matches approved materials?” (2025-exam-priorities)

Hangups usually appear where teams cannot recreate the exact calculation, cannot find the version that was actually disseminated, or cannot explain why the presentation is not misleading even if the number is correct.

Frequent implementation mistakes and how to avoid them

Mistake: treating substantiation as “we can recreate it later.”
Fix: require a packaged substantiation bundle at approval time: data extract + workpaper + methodology memo + disclosure ID.

Mistake: archiving drafts instead of “final as sent.”
Fix: archive the exact posted webpage snapshot or final PDF, plus evidence of dissemination.

Mistake: disclosure drift through formatting changes.
Fix: lock approved files; require re-approval for layout edits that can move, shrink, or remove footnotes.

Mistake: inconsistent fee basis across materials.
Fix: define standard fee treatments and label conventions; add a compliance check that compares net/gross labeling against the calculation file.

Mistake: channel gaps (social, webinars, email snippets).
Fix: expand “advertisement” intake to include short-form and spoken performance claims; require scripts or talking points with claim tickets for prepared remarks where feasible.

Enforcement context and risk implications

The general prohibitions treat false or misleading advertisements as fraudulent, deceptive, or manipulative acts. (17 CFR 275.206(4)-1) Practically, weak substantiation creates two risks: (1) you cannot defend your claims under exam pressure, and (2) you may not detect misleading presentation patterns until after distribution. The SEC has explicitly signaled an exam focus on Marketing Rule compliance, which increases the likelihood your performance advertising controls get tested. (2025-exam-priorities)

Practical execution plan (30/60/90-day)

First 30 days (stabilize and stop preventable errors)

• Assign a single owner for performance-claim governance (often Compliance + Performance/Analytics).
• Stand up the claim ticket template and require it for all new performance advertising.
• Identify where “final as sent” lives today; start immutable archiving for new items.
• Freeze ad-hoc performance charts: require compliance review before reuse in any channel.

Days 31–60 (standardize and scale)

• Build the performance advertising inventory across channels (website, decks, fact sheets, email templates).
• Publish the internal calculation/disclosure standard and map claim types to required disclosures.
• Implement pre-dissemination approval workflow with explicit substantiation links.
• Add third-party guardrails: contract language and routing requirements for marketing partners.

Days 61–90 (monitor and prove supervision)

• Run cross-channel sampling; log findings and corrective actions.
• Backfill substantiation packages for high-visibility evergreen materials (homepage, flagship strategy deck).
• Train marketing and sales leads; test knowledge with a practical exercise (submit a claim ticket).
• Consider tooling to centralize intake, approvals, and immutable archiving. Daydream can help by turning each performance claim into a structured record that links substantiation, approvals, and the final disseminated artifact in one place.

Frequently Asked Questions

Does every performance number need its own substantiation file?

Yes, treat each distinct performance claim as requiring support you can produce on request. You can reuse the same source data and workpaper across multiple claims if the claim tickets clearly point to the shared evidence.

Are website and social media posts included?

If the content is an advertisement and includes performance, it must be true, not misleading, and supportable. Build the same intake and archiving steps for short-form channels. (17 CFR 275.206(4)-1)

What does “not misleading” mean operationally for charts?

Review presentation, not just the numbers: axes, scaling, time periods shown, benchmark labeling, and whether footnotes are legible and proximate to the claim. If formatting changes alter prominence of disclosures, require re-approval.

How do we handle performance content created by a third party (like a placement agent)?

Require them to route drafts through your pre-approval process and prohibit dissemination until compliance approves the final version. Contractually require them to keep your disclosures attached and to provide dissemination evidence on request.

What if marketing wants to reuse an old slide with “since inception” performance?

Force a refresh check: confirm data currency, confirm the same methodology still applies, and re-approve if anything changed (including disclosures). Archive the reused version as a new dissemination event if it goes out again.

What will the SEC exam team ask for first?

Often they start with a sample of advertisements and ask you to substantiate specific claims and show your review/approval and recordkeeping process. The SEC has stated a focus on Marketing Rule compliance in exams. (2025-exam-priorities)