Theta News – SEC Actions Highlight the Importance of Actual Performance

At Theta Research, we stress the need for actual performance data rather than backtested or other hypothetical returns. A recent article by the law firm of K&L Gates, LLP, discusses some of the recent SEC enforcement actions brought as a result of improper performance advertising by advisers.

Entitled, “Recent SEC Actions Highlight Adviser Responsibilities With Respect to Performance Advertising,” the article stresses the SEC’s views that:

1. Hypothetical or back-tested performance data should not be based on assumptions when actual historical data is available (emphasis added);

2. Investment advisers should maintain adequate backup for performance claims made in their advertisements, including claims based on information provided by third parties;

3. Disclosure that performance data is hypothetical or back-tested should be complete and prominently displayed with the performance data; and

4. The prohibition on past specific recommendations in advertising material contained in Section 206(4)-1(a)(5) of the Advisers Act, as modified by SEC guidance, continues to be an important investor protection tool the violation of which is subject to SEC enforcement.

Learn more about Theta Research’s performance documentation and verification methodology.

Posted by MPosey on 01-19-2016 in Industry NewsPermalink