New SEC Staff Guidance Eases Restrictive Model Fee and Promoter Requirements

On January 15, 2026, the SEC staff published new FAQs addressing two common challenges that investment advisers face when complying with the Marketing Rule.¹

The first FAQ clarified that Footnote 590 of the Marketing Rule Adopting Release—which appears to require advisers to use model fees for calculating net performance in many cases—is not prescriptive, and that advisers may use various means to illustrate the effect of differences between actual fees and anticipated fees on performance consistent with the rule’s general prohibitions. The second FAQ permits advisers to compensate promoters who are subject to final orders from self-regulatory organizations (“SROs”), provided certain conditions are met.

In the years since the rule became effective, the staff of the SEC’s Division of Investment Management have periodically issued FAQs clarifying certain aspects of the rule’s application to conduct that might otherwise be prohibited by the rule. Over the past year, the staff has issued several new FAQs that have resulted from extended industry and trade group engagement with the SEC staff.²

Model Fees FAQ

Background

The text of the Marketing Rule permits advisers to calculate net performance applying either actual or model fees.³ Despite this apparent flexibility in the rule, footnote 590 of the Marketing Rule Adopting Release states that if the fees charged to the intended audience of an advertisement are anticipated to be higher than the actual fees used to calculate net performance, the adviser “must use a model fee that reflects the anticipated fee to be charged in order not to violate the rule’s general prohibitions.”⁴

New SEC Staff Guidance

The new “Use of Model Fees” FAQ clarifies that the guidance in footnote 590 should be interpreted through the lens of the Marketing Rule’s general prohibitions. Specifically:

The Commission noted in the adopting release that the general prohibitions are intended to “provide appropriate flexibility and regulatory certainty for advisers considering how to market their investment advisory services” and “[i]n applying the general prohibitions, an adviser should consider the facts and circumstances of each advertisement.” In the staff’s view, whether the use of actual fees violates the general prohibitions depends on all of the facts and circumstances of a specific advertisement, including, but not limited to, relevant disclosures. The staff’s view is that advisers may use various means to illustrate the effect of differences between actual fees and anticipated fees on performance.

Practical Implications

This guidance provides welcome relief for advisers that have struggled to apply the prescriptive language in footnote 590 to various forms of investment performance. For example:

• Private fund advisers seeking to present the actual performance of prior funds will not necessarily need to recalculate the performance of prior funds based on model fees that align with the higher fees charged by the advertised fund.
• Institutional investment managers that advertise composite performance of clients with different fee arrangements will not necessarily need to present performance based on model fees. Notably, the guidance also brings Marketing Rule requirements into closer alignment with the Global Investment Performance Standards (GIPS^®).

Advisers should note that the new FAQ is not an absolute “green light” to present net performance calculated using actual fees. The staff also states in the new FAQ that “In some circumstances . . . it may be inconsistent with the rule’s general prohibitions to solely present net performance reflecting actual fees.”⁵ Accordingly, in most cases, advisers will need to consider adding appropriate disclosure regarding the difference between the fees used to calculate actual performance and the anticipated fees of the offered account or fund. In some cases (e.g., if actual performance is based on a non-fee-paying seed account) standard disclosures may not be sufficient to address the risk that investors would be misled by actual net performance, and more prominent alternatives would be warranted.

While not directly referenced in the new FAQ, the Marketing Rule Adopting Release interprets the general prohibitions to apply differently to sophisticated and unsophisticated investors.  Specifically, the release states that “[t]he nature of the audience to which the advertisement is directed is a key factor in determining how the general prohibitions should be applied” and “the amount and type of information that may need to be included in an advertisement directed at retail investors may differ from the information that may need to be included in an advertisement directed at sophisticated institutional investors.”⁶ This guidance remains relevant for advisers considering the appropriate content and prominence of disclosure when presenting actual net performance in light of the new FAQ.

Although advisers are not required to change current practices in response to these FAQs, we anticipate most will seek to take advantage of the additional flexibility afforded by the new guidance. 

Promoter Disqualification FAQ

Background

The Marketing Rule prohibits investment advisers from knowingly compensating certain “ineligible persons” for testimonials or endorsements, which includes persons who are subject to the entry of certain final orders by an SRO.⁷ As a result, certain promoters could be restricted from providing endorsements or testimonials (including broker-dealers and other entities operating as paid solicitors or placement agents) by the entry of an SRO order.

New SEC Staff Guidance

In the newly issued FAQ, the staff states that it believes it would be appropriate to permit a person who is subject to an SRO order to provide compensated testimonials or endorsements if:

1. The sole reason the person is an ineligible person is because of a final order by an SRO;
2. The SRO did not expel or suspend the person from membership, bar or suspend the person from association with other members, or prohibit the person from acting in any capacity;
3. The person is in compliance with the terms of the SRO’s final order, including any penalties or fines; and
4. For a period of ten years following the date of the SRO order, any advertisement containing the testimonial or endorsement discloses that the person providing the testimonial or endorsement is subject to an SRO order, and includes the order or a link to the order on the SRO’s website, if available.⁸

The new FAQ largely mirrors the approach taken in the Marketing Rule to orders by the Commission.

An adviser engaging an ineligible person in reliance on the new FAQ should consider seeking representations regarding such person’s compliance with the FAQ conditions, as well as their own disclosure obligations in connection with the fourth condition listed above.