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Regulation and Compliance > Federal Regulation > SEC

SEC Takes Aim at Performance That’s Just Too Good to Be True

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If you send investors documents showing you’ve delivered a 20% return, now you really have to prove it.

Wall Street’s main regulator is going to require investment advisors to create and maintain any documents that are distributed demonstrating performance calculations or returns, according to a statement Thursday. That will make it easier for the Securities and Exchange Commission to identify fraudulent advertising and pursue misleading claims.  

In addition to the new record-keeping requirements, the SEC approved changes Thursday to the so-called ADV form, which investment advisors use to register with the agency. Firms will now have to disclose additional information about separately managed accounts, such as their use of derivatives. Other modifications will streamline registration and reporting for groups of private fund advisors that operate as a single advisory firm. 

“These amendments are an important step in a series of rulemakings to enhance the SEC’s monitoring and regulation of the asset management industry,” SEC Chairwoman Mary Jo White said in a statement. “Requiring investment advisers to report this additional information will provide investors and the Commission with a better understanding of the risk profile of each adviser and the industry as a whole.”

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