A recent SEC order highlighted the regulator’s stance on hypothetical backtested data used in marketing materials. The SEC cited a large fund manager for failures to include adequate disclosures, misrepresentations and lack of compliance coordination as related to backtested performance data used in certain marketing pieces. Founder and President Amy Lynch commented that the use of backtested data remains a very gray area in the eyes of the SEC with internal firm communication breakdowns often at the center of compliance lapses. Ms. Lynch suggests that large firms with multiple departments involved with marketing provide training across the organization to help provide better understanding of novel and complex marketing strategies. See IGNITES (subscription required), “Beware of Backtesting: Lessons From MFS’s $1.9M Marketing Mishap.”
