SEC No-Action Letter Modifies Use of Past Recommendations in Adviser Advertisements

By: Terrance J. O’Malley, Jessica Forbes, Christine M. Lombardo

The SEC staff recently issued a no-action letter modifying its position on the use of past investment recommendations in advertisements under Rule 206(4)-1(a)(2) of the Advisers Act. The no-action letter permits an adviser to distribute marketing materials to clients and prospective clients that show an equal number of holdings that contributed most positively and most negatively to the performance of a representative account’s performance, so long as the recommendations are objectively chosen and their appearance and substance meet certain criteria.

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