SEC Drops the Hammer on Footnote 590: A Win for Financial Performance Marketing

For the last two years, investment advisers and their marketing teams have operated under a cloud of uncertainty regarding the SEC's Marketing Rule, specifically the notorious "Footnote 590." The industry interpretation was rigid: if you wanted to show net performance, you were effectively forced to deduct the highest possible model fee, regardless of whether that fee reflected reality. It was a prescriptive mandate that artificially depressed reported returns in marketing materials, forcing funds to compete with one hand tied behind their back.

As of January 15, 2026, that era is effectively over. The SEC Division of Investment Management released new FAQs that fundamentally alter the enforcement posture regarding net performance and promoter disqualification. This is not a minor administrative update. It is a material shift from bright-line prohibitions to a "facts and circumstances" approach.

For founders and CMOs in the wealth and asset management space, this signals a green light to modernize how you present returns and how you build affiliate partnerships. The handcuffs have been loosened, but the requirement for rigorous documentation has arguably increased. If you manage an ad budget for an investment product, your creative strategy needs to change immediately.

The Death of the Model Fee Mandate

The most significant commercial development in this update is the walk-back on net performance calculations. previously, the guidance suggested that deducting a model fee equal to the highest fee charged to the intended audience was the only safe harbor. This often resulted in marketing materials showing returns significantly lower than what the average client actually received, purely to satisfy a worst-case compliance scenario.

The new guidance explicitly permits the use of actual fees in calculating net performance, provided the overall presentation is "fair and balanced." This is a massive win for performance marketing. It means your advertisements can now reflect the economic reality of your fund's performance rather than a theoretical floor. If your weighted average fee is lower than your highest rack rate, your marketing materials can now reflect a net return that is closer to the truth.

However, this flexibility comes with a catch. You cannot simply swap the numbers and call it a day. The "fair and balanced" standard puts the burden of proof on the firm. If you use actual fees, you must ensure that the resulting figure is not misleading to the specific audience you are targeting. The SEC is trading prescriptive rules for principles-based enforcement. You have more freedom to design the creative, but you carry more risk if you cannot substantiate why your presentation is fair.

Re-Opening the Influencer and Affiliate Pipeline

The second major shift addresses the "bad actor" disqualification for promoters. Under the initial interpretation of the Marketing Rule, firms were terrified to engage with any influencers, affiliates, or solicitors who had even minor disciplinary histories. A past FINRA sanction could effectively blacklist a high-performing media partner.

The new FAQ provides a "no-action" position that allows advisers to compensate promoters subject to certain SRO (e.g., FINRA) orders, provided the order did not result in a suspension or bar and the promoter has complied with the terms. This re-opens the talent pool. In the world of paid acquisition and partnerships, this allows firms to work with established financial voices who may have legacy regulatory baggage but are currently in good standing.

The trade-off is disclosure. If you use such a promoter, you must prominently display the existence of the SRO order for a 10-year lookback period. Commercially, this changes the negotiation. You can hire the talent, but you must assess whether the mandatory disclosure kills the conversion rate. It becomes a conversion optimization problem rather than a legal hard stop.

Commercial Implications for Growth Leaders

This update shifts the competitive landscape for paid media in the financial sector. Firms that move quickly to update their performance data using actual fees (where appropriate) will immediately show stronger numbers than competitors still clinging to the old, conservative model fee approach. In an industry where basis points drive allocation decisions, this is a distinct competitive advantage.

Furthermore, the clarification reinforces the distinction between retail and institutional audiences. The SEC has signaled that disclosure intensity should match the sophistication of the target. This allows for more streamlined, high-impact messaging when targeting institutional capital, provided the backup data is robust. For retail campaigns, the "fair and balanced" requirement likely demands better UX design in your landing pages to ensure disclosures are digestible, not just present.

The defining characteristic of this new phase is "documentation as a shield." Because the bright lines are gone, your internal compliance logs become your primary defense. Marketing teams need to work in lockstep with legal to document exactly why a specific fee methodology was chosen for a specific campaign. The "why" now matters as much as the "what."

Aragil POV: Strategy Adjustments

If we were managing a client's investment portfolio marketing today, our immediate move would be a creative audit. We would review every piece of collateral displaying net performance—pitch decks, social ads, landing pages—and calculate the delta between the currently displayed "model fee" returns and the newly permissible "actual fee" returns. If the difference is material, we re-issue the creative.

We would also revisit our exclusion lists for influencers and affiliates. There are likely high-reach partners who were previously disqualified due to minor infractions who are now viable candidates. We would initiate pilot programs with these partners, ensuring the mandatory 10-year disclosure is integrated into the ad units in a way that minimizes friction while satisfying the rule.

The mistake most teams will make is complacency. They will either ignore the update and continue with sub-optimal performance data, or they will swing too far, cherry-picking fee structures to inflate returns without adequate disclosure. The winners will be the firms that aggressively optimize their reported numbers while maintaining a pristine audit trail that justifies the "fairness" of those numbers to a regulator.

Conclusion

The SEC's January 2026 update is a rare instance of a regulator handing marketing teams a sharper knife. By retreating from the rigid interpretation of Footnote 590, the SEC has acknowledged that accuracy is better than arbitrary conservatism. For founders and growth leads, the directive is clear: update your performance calculations to reflect reality, expand your promoter network, and invest heavily in the compliance infrastructure that allows you to take these calculated risks.