MFA submitted a letter to the Securities and Exchange Commision (SEC) with a request for clarification on the Marketing Rule for Investment Advisers. The letter identified several areas in which MFA believes clarification would be beneficial:
- One-on-one communications
- Clarifying that “one-on-one” communications can include or reference content that has previously been requested by other investors and provided by the adviser, without turning that requested material into an “advertisement” subject to the rule
- Similarly, that a form of chart/table that is re-used–but with customized outputs/calculations– is not an “advertisement”
- Predecessor Performance
- MFA urges a more workable and flexible approach to documenting performance of a predecessor fund before using it in an advertisement, including where only a portion of the performance is relevant to the successor firm.
- “Layered” disclosure
- Seeking confirmation from the staff that required disclosures may be provided “one click away” or hyperlinked, so long as each “layer” is fair and balanced.
- Testimonials and endorsements
- Urging guidance that makes clear the certain “arm’s length” payments to vendors and services providers is not “indirect” compensation if those vendors simply refer others to the adviser.
- Presentation of Actual Returns (relates to “model fees” and infamous footnote 590)
- Clarifying that presenting actual returns of a fund is permissible with prominent disclosure that investor results will differ for various reasons including multiple classes, different fee structures within the same fund or where fees have varied over time.
- For reference: this item is due to confusion in the industry generated by a footnote in the rule release (fn 590) that seems to suggest model fees are required where the audience for an advertisement could experience fees higher than current or historical fees. Calculating an accurate or helpful model fee in those situations (different classes, fees negotiated by individual investors, fees that may have varied over time) is difficult if not impossible.
