Performance Disclosures

April 30, 2015 by  
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Firms that claim compliance with the GIPS® standards are also required to comply with all applicable laws and regulations. This can be a somewhat difficult task for SEC-registered investment advisers because (unlike the GIPS standards) the SEC doesn’t provide a specific list of required disclosures when advertising performance. There are, however, no-action letters that provide guidance and, if adhered to, can help firms to maintain compliance.

SEC-registered advisers should consider the following when presenting performance to prospective clients:

  • Disclose whether and to what extent the performance results reflect the reinvestment of dividends and interest.
  • Disclose the effect of material market or economic conditions on the performance results.
  • Disclose all material relevant factors when comparing results to an index.
  • Disclose that past performance is not a guarantee of future results.
  • If gross-of-fees returns are presented then:
    • Disclose that the client’s return will be reduced by advisory fees and other expenses.
    • Disclose a representative example such as a table, chart, graph or narrative that shows the effect an investment advisory fee, compounded over a period of years, could have on the value of a client’s portfolio.

 

This is prepared solely for educational purposes. It is not legal or professional advice. Readers must not rely on it to provide such advice, either generally or with respect to a particular question or issue. You should reference this overview in conjunction with the GIPS standards and applicable regulatory rules and regulations. If you have questions what disclosures should be included when presenting performance please contact us at info@guardianperformancesolutions.com.