Hypothetical performance sweep
SEC Press Release 2023-173
SEC Sweep Into Marketing Rule Violations Results in Charges Against Nine Investment Advisers
Read the current text at the source ↗Guide: Performance Advertising Under the Marketing Rule: Net, Gross, Hypothetical and More
- Applies to
- SEC-registered investment adviser
- Effective
- September 11, 2023
When this applies
A settled administrative proceeding. The firms neither admitted nor denied the Commission's findings, so nothing here is established fact about their conduct, and a settlement is not precedent. It shows what the Commission chose to charge and what it cost, which is useful, and it decides nothing about your firm.
What the rule says
A description of the source text.
On 11 September 2023 the Commission announced settled charges against nine registered investment advisers over hypothetical performance. The SEC's orders find that the firms advertised hypothetical performance to the general public on their websites without adopting and/or implementing policies and procedures reasonably designed to ensure the performance was relevant to the likely financial situation and investment objectives of the intended audience. Two firms were also charged over failing to keep required copies of advertisements. In the Commission's words: “Without admitting or denying the SEC’s findings, the charged firms agreed to be censured, cease and desist from violating the charged provisions, comply with undertakings not to advertise hypothetical performance without having the requisite policies and procedures, and pay civil penalties ranging from $50,000 to $175,000.” Total penalties were $850,000.
What it requires
Luna's plain-English reading, not the Commission's words.
- 01The charge was the missing policies and procedures, not the performance figures themselves. A firm can be charged here with numbers that were entirely accurate.
- 02Website publication is what made the audience the general public, and an adviser cannot form a view about the financial situation of an audience it cannot identify.
- 03Two firms picked up a books and records charge alongside it, because the advertisements had not been kept.
What examiners find
Luna's observations, not a Commission publication.
- Hypothetical or model performance on a public website with no audience-relevance procedure behind it.
- Marketing materials not retained under Rule 204-2(a)(11).
Topics
Source last checked against the regulator's copy on October 14, 2026. That date is written by an automated check, not by hand.
Luna Compliance is software, not a law firm. This page is not legal advice and reading it creates no attorney-client relationship. Where this page and the regulator's copy differ, the regulator's governs.