Performance Advertising General Requirements

Performance Advertising General Requirements under the SEC Marketing Rule mean: if you show gross performance in any advertisement, you must also show net performance, and you must present results in a fair-and-balanced way that allows a reader to compare them. Operationally, this is a repeatable workflow: define “gross vs. net,” calculate net correctly, standardize time periods, and harden review/approval evidence. (17 CFR § 275.206(4)-1)

Key takeaways:

• If gross performance appears anywhere, net performance must appear too, with equal prominence and in a comparable format. (17 CFR § 275.206(4)-1)
• “Net” must deduct all fees and expenses a client would have paid, not just the advisory fee. (17 CFR § 275.206(4)-1)
• Build an approval package that proves the calculation method, inputs, and presentation choices were reviewed before publication. (17 CFR § 275.206(4)-1)

This requirement page is for Compliance Officers, CCOs, and GRC leads supporting investment advisers and fund managers who publish marketing materials with performance results. The operational risk is straightforward: marketing teams often prefer gross results because they look better, while regulators care whether prospects are misled by incomplete, non-comparable, or selectively presented performance.

The SEC Marketing Rule’s performance advertising general requirements force discipline in two places: (1) calculation (net performance must reflect deductions of all fees and expenses that a client would have paid) and (2) presentation (gross and net must be shown together, with at least equal prominence, in a format designed to facilitate comparison, and overall performance presentation must be fair and balanced). (17 CFR § 275.206(4)-1)

Treat this as a production control problem, not a one-time memo. You need standardized definitions, templates that “make the right thing easy,” and a pre-publication review that can survive an exam. If you centralize artifacts and approvals in a single system (many teams use Daydream for marketing compliance workflows and evidence capture), you reduce rework and prevent “one-off” decks from becoming your next deficiency.

Performance advertising general requirements (what the rule demands)

The requirement has two non-negotiables:

1. No gross without net. An advertisement may not include any presentation of gross performance unless the advertisement also presents net performance. (17 CFR § 275.206(4)-1)

2. Fair and balanced performance presentation. You may not present performance results in a manner that is not fair and balanced. (17 CFR § 275.206(4)-1)

The practical interpretation in the provided guidance is more specific: whenever gross performance is shown, net performance must also be presented with at least equal prominence and in a format designed to facilitate comparison; net performance must reflect the deduction of all fees and expenses a client would have paid (including advisory fees, custodial fees, and other costs); and performance must be presented over standardized time periods. (17 CFR § 275.206(4)-1)

Regulatory text

Regulatory excerpt: “An advertisement may not include any presentation of gross performance unless the advertisement also presents net performance, and may not present performance results in a manner that is not fair and balanced.” (17 CFR § 275.206(4)-1)

Operator translation (what you must do):

• If a chart, table, sentence, footnote, or attachment includes gross performance, the same communication must also include net performance. (17 CFR § 275.206(4)-1)
• Present net performance so a reasonable reader can compare it to gross without hunting (equal prominence, comparable format). (17 CFR § 275.206(4)-1)
• Calculate net performance by deducting all fees and expenses the client would have paid, not a partial subset. (17 CFR § 275.206(4)-1)
• Standardize the time periods you present so performance is not selectively framed. (17 CFR § 275.206(4)-1)

Who it applies to (and when)

Entity types

• Investment advisers
• Fund managers
  (17 CFR § 275.206(4)-1)

Operational contexts where this shows up

• Pitchbooks, RFP/RFI responses, due diligence questionnaires with performance exhibits
• Website performance pages and factsheets
• Slide decks used by IR/sales in meetings
• One-page tear sheets and product flyers
• “Lookback” emails or newsletters that cite strategy results

What counts as “performance advertising” for your program Don’t get stuck debating whether something is “marketing” versus “education.” If it is an advertisement under the SEC Marketing Rule and it presents performance, apply this control set. (17 CFR § 275.206(4)-1)

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

Step 1: Set internal definitions and calculation standards

Create a written “Performance Advertising Standard” that covers:

• What your firm treats as gross performance (returns before fees/expenses) and net performance (returns after fees/expenses required by the rule). (17 CFR § 275.206(4)-1)
• Fee/expense components included in net, explicitly listing advisory fees, custodial fees, and any other costs the client would have paid. (17 CFR § 275.206(4)-1)
• Standard time periods your marketing will use (e.g., consistent multi-period presentation across materials), and when exceptions are permitted with compliance sign-off. (17 CFR § 275.206(4)-1)

Practical tip: require Marketing to source performance figures only from an approved performance dataset (Performance/Finance-owned), not from analyst-built spreadsheets.

Step 2: Build “gross + net together” templates

Create locked templates for common formats:

• Gross and net side-by-side table
• Gross and net paired line chart
• Gross and net paired bar chart
• Standard footnotes (methodology, fee/expense deductions, time period definitions)

Template rules to encode:

• Net must appear whenever gross appears, with equal prominence (same font size/weight, same chart scale, same visual hierarchy). (17 CFR § 275.206(4)-1)
• Net must be comparable (same periods, same benchmarks if shown, same calculation basis). (17 CFR § 275.206(4)-1)

Step 3: Implement a pre-publication review gate

Your review should be a checklist tied to the rule text:

Calculation checks

• Does the ad include gross performance anywhere (including appendices)? If yes, confirm net is included in the same ad. (17 CFR § 275.206(4)-1)
• Do net returns deduct all required fees and expenses (advisory, custodial, other costs)? (17 CFR § 275.206(4)-1)
• Are time periods standardized per firm policy? (17 CFR § 275.206(4)-1)

Presentation checks

• Are gross and net displayed with at least equal prominence and easy comparison? (17 CFR § 275.206(4)-1)
• Is the overall presentation fair and balanced (no selective emphasis, no “fine print net”)? (17 CFR § 275.206(4)-1)

Operationalize as an approval workflow: Marketing drafts, Performance/Finance validates calculations, Compliance approves presentation and disclosures, then the content is released.

Many teams manage this in Daydream by routing materials through defined approvers, attaching calculation workpapers, and locking the final approved version so the distributed file matches the reviewed file.

Step 4: Control distribution to prevent “approved deck drift”

A common failure mode is clean approval followed by field edits. Add distribution controls:

• Require sales/IR to use only the latest approved version from a controlled repository.
• Disable local editing where feasible (PDF release version).
• Establish an exception process for “custom client asks” that still routes through the review gate.

Step 5: Run periodic surveillance

Set a recurring spot-check process:

• Sample recently used materials (from CRM attachments, email archives where permitted, data room logs).
• Confirm gross/net pairing and prominence.
• Confirm standardized periods remain intact.
• Track findings to remediation and template improvements.

Required evidence and artifacts to retain

Build an “exam-ready” package for each performance advertisement:

• Final approved advertisement (the exact version distributed)
• Performance calculation support for gross and net (inputs, methodology narrative)
• Fee/expense deduction schedule showing what was included in “net” (advisory, custodial, other costs) (17 CFR § 275.206(4)-1)
• Approval records: who reviewed, what date, what changes were requested, final sign-off
• Template/version history (to show standardization and controlled changes)
• Exception memos (if any) documenting why a deviation was approved and how the presentation remains fair and balanced (17 CFR § 275.206(4)-1)

Common exam/audit questions and hangups

Expect reviewers to probe:

• “Show me where net performance is presented whenever gross is presented.” (17 CFR § 275.206(4)-1)
• “How did you calculate net, and which fees and expenses did you deduct?” (17 CFR § 275.206(4)-1)
• “Who owns the calculation, and who approves the advertisement?”
• “How do you ensure equal prominence and comparability in practice?” (17 CFR § 275.206(4)-1)
• “What are your standardized time periods, and how do you prevent cherry-picked windows?” (17 CFR § 275.206(4)-1)
• “How do you control one-off client decks created by sales?”

Hangup to anticipate: teams often can produce the glossy PDF but cannot reproduce the calculation package or show that the numbers came from a controlled source.

Frequent implementation mistakes (and how to avoid them)

1. Net in a footnote while gross is in the headline table. Fix: enforce template rules for equal prominence; ban “net only in disclosure.” (17 CFR § 275.206(4)-1)

2. Net returns deduct only advisory fees. Fix: require a documented fee/expense inclusion checklist for net that covers advisory, custodial, and other costs the client would have paid. (17 CFR § 275.206(4)-1)

3. Gross shown in an appendix “for detail,” net omitted. Fix: apply the same gate to the full package, including annexes and exhibits. (17 CFR § 275.206(4)-1)

4. Inconsistent time windows across ads. Fix: define standardized periods in policy and embed them in templates and chart macros. (17 CFR § 275.206(4)-1)

5. Version drift after approval. Fix: distribute only from a controlled repository; retain immutable final versions and approvals.

Enforcement context and risk implications

No public enforcement sources were provided in the supplied materials, so this page does not list specific cases. Still, the risk is practical: performance advertising is a high-scrutiny area, and weak controls tend to produce repeat issues across many materials. The impact is rarely limited to a single deck; it becomes an enterprise pattern that is easy for an examiner to sample and document.

Practical execution plan (30/60/90)

First 30 days: Stabilize and stop the bleeding

• Inventory all current performance ads (web, pitchbooks, factsheets, RFP exhibits).
• Freeze or pull any material that shows gross without net. (17 CFR § 275.206(4)-1)
• Publish interim templates for gross+net paired presentation with equal prominence. (17 CFR § 275.206(4)-1)
• Stand up a basic approval gate and require it for any new/updated materials.

By 60 days: Standardize calculation and evidence

• Finalize the written Performance Advertising Standard (definitions, fee/expense deductions, standardized periods). (17 CFR § 275.206(4)-1)
• Centralize performance data sourcing and require Finance/Performance sign-off for net calculations. (17 CFR § 275.206(4)-1)
• Implement evidence capture for each approved ad (calculation support + approvals).
• Train Marketing and IR on “gross triggers net” and equal-prominence expectations. (17 CFR § 275.206(4)-1)

By 90 days: Make it durable

• Add distribution controls (single source of truth, versioning, locked final output).
• Launch surveillance sampling and track findings to closure.
• Convert repeat issues into template fixes and checklist updates.
• If you use Daydream, configure standard intake forms, required attachments (calc package), and approval routing so reviewers can reject non-compliant drafts before they spread.

Frequently Asked Questions

If we only want to show gross performance, can we do that?

No. If an advertisement includes any gross performance, it must also present net performance in the same advertisement. (17 CFR § 275.206(4)-1)

How prominent does net performance need to be?

Net performance must be presented with at least equal prominence and in a format designed to facilitate comparison to gross performance. Practically, that means no burying net in footnotes or using different scales that prevent side-by-side comparison. (17 CFR § 275.206(4)-1)

What fees and expenses have to come out of net performance?

Net performance must reflect the deduction of all fees and expenses that a client would have paid, including advisory fees, custodial fees, and other costs. Document your inclusions so the calculation is reproducible. (17 CFR § 275.206(4)-1)

Do we have to use standardized time periods every time we show performance?

The provided guidance states performance must be presented over standardized time periods. Put those periods in policy and templates, and require Compliance approval for any exception. (17 CFR § 275.206(4)-1)

Does this apply to one-off RFP responses and custom client decks?

Yes if the content is an advertisement that presents performance. Treat custom materials as high risk because they are more likely to bypass templates and controls. (17 CFR § 275.206(4)-1)

What evidence should we expect to produce in an exam?

Keep the final approved piece, the net calculation support showing fee/expense deductions, and the approval workflow records. Examiners commonly test whether the distributed version matches the approved version. (17 CFR § 275.206(4)-1)