Clarity at Last: SEC Marketing Rule FAQs Offer Long-Awaited Guidance

Since the SEC finalized its Marketing Rule in 2021, asset managers and industry professionals have been asking for clarity on how to apply some of its more ambiguous requirements. Key issues—especially around extracted performance and portfolio characteristics—have been debated in countless webinars, whitepapers, and conference sessions. Now, on March 19, 2025, the SEC provided long-awaited guidance in the form of official FAQs. 

Here’s what you need to know.

Extracted Performance: What You Can (Finally) Show

One of the most discussed topics was how to handle extracted performance—defined by the SEC as “the performance results of a subset of investments extracted from a portfolio.” This might include a specific asset class (like equities) or even a single security (like Apple stock). 

The Marketing Rule states that performance must be shown net of fees, which raised difficult questions. How do you derive a meaningful net return for a security when fees aren’t calculated or charged at that level? Would showing gross performance alone be considered misleading?

 The Good News: Gross Extracted Performance is Permissible—With Context

The SEC has clarified that showing gross performance of an extracted investment is not inherently misleading, as long as:

• It’s clearly labeled as gross of fees and expenses.
• Both gross and net performance of the entire portfolio are provided.
• All data is presented with equal prominence, for the same date ranges, and in a way that allows easy comparison.

This strikes a balance between accuracy and practicality—removing confusion without compromising investor transparency.

Portfolio Characteristics: Navigating the Gray Area

Another sticking point has been whether certain portfolio metrics—like yield, attribution, or Sharpe ratio—count as “performance,” and whether they, too, must be shown net of fees. 

These measures are typically calculated on a gross basis and often don’t have a meaningful “net” equivalent. The rule itself did not explicitly define whether these values would be considered performance, leaving many firms guessing.

The Clarification: Context Matters Here Too

According to the FAQs: 

• If metrics are shown without the deduction of any fees or expenses and clearly labeled as such, they are unlikely to be considered misleading.
• As with extracted performance, firms must show gross and net performance of the portfolio for fair comparison.

This guidance gives asset managers confidence to use familiar, insightful portfolio metrics—without fear of regulatory missteps or misleading prospective investors.

What This Means for Asset Managers

With this updated guidance, the path forward is clearer:

• Ensure transparency and clarity in all marketing communications.
• Label gross values appropriately and always include net performance at the portfolio level.
• Consider the audience’s sophistication and expectations when presenting data. 

Most importantly, remember that non-compliance can trigger SEC enforcement, so this is not just about best practices and market integrity—it’s about regulatory risk.

What This Means for Clearwater Clients

At Clearwater, we’ve been tracking these developments closely. Over the past four years, we’ve worked with clients to be in compliance with the Marketing Rule, even as guidance remained vague. Like many firms, our clients often chose to remove potentially non-compliant metrics while waiting for clarity. 

Now that clarity on these points has arrived, the Clearwater platform fully supports all of the required metrics. Our clients can already access the net and gross calculations required, and our flexible data models and intuitive reporting tools enable compliant, transparent performance reporting across all asset classes.

The SEC’s updated FAQs resolve some of the thorniest issues surrounding the Marketing Rule. They reinforce what many in the industry have long believed: that clear labeling and context are more important than overly rigid interpretations.

For asset managers, it’s a welcome step forward—and for Clearwater clients, it’s one more reason to feel confident in their data, reporting, and compliance.