3 Things Asset Managers Need to Know About The Modernized SEC Marketing Rule

New reporting rules from the SEC that will immediately impact many asset managers have finally gone into effect. The modernized SEC marketing rule, which went into effect on November 4, 2022, is focused on the information shared between investment managers and their investors. It’s been over 60 years since the SEC issued any major changes to these rules, which were established at a time when social media and the internet did not yet exist. Obviously, a lot has changed since then, and asset managers now have to rethink the ways they represent their funds in the various reports they provide clients and prospects.

Many resources have surfaced on the similarities and differences between the old and new rules, as well as guides to how managers can best implement the necessary changes. As a data and reporting resource for asset managers, we’ve been following these rule changes and what they mean for the industry. Below, we are sharing three things all asset managers need to know about how the new rule impacts GIPS reporting and how technology and service providers can help your firm implement these changes.

1. The new requirement: Firms that claim compliance with the GIPS standards are required to provide GIPS composite reports to new business prospects. Under the new rule, the SEC views GIPS reports as advertisements. As advertisements, firms must update what their GIPS composite report shows to abide by the more prescriptive framework for presentation of performance.
   • Firms must present net of fees performance.
   • Firms must show 1-, 5-, and 10-year returns. If a composite did not exist for a required time period, then the firm must also present performance since inception for the composite.
2. The exception: Under the rule, GIPS composite reports may stay the same as-is, as long as they are presented alongside marketing material that includes the performance detail noted above.
3. How to comply: Managers that plan to present their GIPS composite report without the inclusion of other marketing material will need to update their GIPS report data. Flexible reporting software can help managers create new reports to show net of fees performance. For example, Archer’s reporting capabilities enable asset managers to show net of fee returns, both cumulative and annualized, for 1-, 2-, 3-, 4-, 5-, 6-, 7-, 8-, 9-, and 10-year periods and since inception. Asset managers on Archer’s platform can create GIPS composite reports that comply with the modernized SEC marketing rule using a single Archer report.

At Archer, we’re keeping our ear to the ground on new regulatory developments and making updates to our offering to ensure our clients can easily remain compliant. For more information on how Archer can assist your firm in establishing a monthly composite review process tailored to your needs, please contact your Relationship Manager, or reach out to us at [email protected].