Clover Capital
An advertisement made by an investment adviser must comply with the guidelines set forth in Clover Capital Management (pub. avail. Oct. 28, 1986). In accordance with this SEC letter, an adviser may advertise or otherwise disseminate its performance results provided that the advertisement or written communication discloses:
- The effect of material market or economic conditions on the results advertised (e.g., it would be misleading to advertise that the adviser's composite of equity managed accounts increased 10% without disclosing that the equity market was up 40% during the same period):
- Performance net of fees (e.g., advisory fees, brokerage commissions and other fees clients actually paid), with the following exceptions:
- gross peformance figures may be presented if they are presented side-by-side with the net figures with equal prominence;
- custodial fees do not have to be netted out;
- performance figures may be presented net of a model fee, provided that the model fee is equal to the highest fee charged to the accounts that make up the composite; and
- gross performance figures may be presented in one-on-one presentations.
- Whether the performance reflects the reinvestment of dividends or other distributions;
- The possibility that a client may incur loss if the advertisement makes a claim about potential profits;
- The similarities and differences between how accounts are managed and an index if the advertisement includes the performance of an index;
- Material conditions, objectives and investment strategies employed by the adviser to achieve the performance; and
- If applicable, the results portayed relate only to a select group of client accounts, the basis for selecting the particular client accounts, and the effect, if material, of limiting the performance result to a particular group of clients.
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