A Hedge Fund Law Report article covers the US Securities and Exchange Commission’s (SEC’s) recent settled enforcement action against an SEC-registered investment adviser, further proving that the SEC continues to scrutinize advisers’ use of backtested results including their policies and procedures governing that rule.
Commenting on the alleged misconduct and the terms of the settlement, partner Christine Lombaro stated, “The real takeaway here is that the SEC expects policies and procedures to contemplate use of hypothetical performance, if such performance is used, even under the predecessor advertising rule. Given that the new marketing rule explicitly requires policies and procedures in certain contexts, advisers should be mindful of these matters as they conduct annual reviews of existing policies and procedures, as well as in connection with work toward implementing the new marketing rule by the November 2022 compliance date.”
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