Change is once again underway at the U.S. Securities and Exchange Commission.
In March 2025, the SEC staff issued revised guidance on Rule 206(4)-1 under the Investment Advisers Act of 1940 — better known as the Marketing Rule. This update comes amidst broader political transitions, as the new administration reevaluates rulemaking priorities. With Paul Atkins, a former SEC commissioner known for his emphasis on investor harm in enforcement actions, now nominated as Chairman, the SEC’s regulatory posture is poised for a shift.
A Closer Look at the March 2025 Update
On March 19, 2025, the SEC provided fresh clarity around how investment advisers may present extracted performance and certain portfolio characteristics. Key highlights from the revised guidance include:
- Greater Flexibility for Gross Performance Reporting: Advisers may now present extracted performance and certain portfolio metrics on a gross basis—without the previously strict requirement to pair them with net performance—so long as the presentation is not misleading and includes appropriate context.
- Focus on Transparency Over Format: The SEC is signaling a move toward substance over form, emphasizing that disclosures must be fair and balanced, rather than adhering to rigid presentation formats.
- Reduced Legal Ambiguity: The new guidance offers welcome clarity in what was previously a gray area of marketing compliance.
What This Means for Fund Managers
If you're managing a closed-end alternative investment fund, this is a moment to take stock. These changes present both opportunities and responsibilities:
- Enhanced Marketing Leverage: Managers can now more confidently highlight top-performing portfolio segments or characteristics that reinforce their strategy—a valuable tool in today’s hyper-competitive fundraising environment.
- Compliance Adjustments Required: While the guidance allows for flexibility, it doesn’t eliminate the need for strong internal controls, documentation, and review processes to ensure materials aren’t misleading.
- Potential for Further Deregulation: With Atkins at the helm, expect a regulatory approach that leans more heavily on investor protection as defined by measurable harm, rather than rule-by-technicality.
The Role of Fund Administrators in the New Regulatory Era
For fund administrators like Vector, the changes underscore the critical importance of close alignment and coordination with fund managers. As marketing flexibility expands, so does the need for robust data accuracy, audit-ready performance reporting, and clear documentation to support any claims made to investors.
Here's how this impacts the fund admin relationship:
- Increased Coordination on Reporting Inputs: Administrators and managers must work hand-in-hand to determine which data is used for extracted or characteristic-based performance reporting—and ensure consistency across LP communications.
- Stronger Support for Compliance Teams: Administrators are often the first line of support for compliance reviews, providing backup for performance metrics, calculation methodologies, and disclosure tracking.
- Heightened Demand for Operational Precision: As fund managers gain more flexibility in marketing performance, the burden on administrators increases to ensure the underlying data is accurate, well-documented, and audit-ready. Administrators must deliver clean, consistent reporting outputs that can be confidently used in marketing materials.
Vector’s Take
At Vector, we know that when marketing rules evolve, operational precision becomes even more essential. Fund managers rely on us to deliver timely, accurate, and well-documented reporting that supports their investor communications—without introducing unnecessary compliance risk.
Our team and technology are purpose-built to handle the complexities of closed-end fund structures—giving you confidence in the numbers behind your performance. As regulatory guidance shifts, we remain focused on doing what we do best: providing high-integrity reporting and seamless coordination across your back office—so you can focus on fundraising and portfolio execution.
Need a fund administrator you can trust with the numbers behind your story?
Let’s talk about how Vector delivers accurate, audit-ready reporting that scales with your strategy.
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