Issue Contents:

A Tale of Three Anniversaries

By David Spaulding, DPS, CIPM

My wife and I spent some time in New York City earlier this month. Our primary reason for visiting was to attend the opera at the Metropolitan Opera House. The conductor, Ramón Tebar, was making his Met debut and happens to be the conductor of Opera Naples, in Florida. We’ve had the pleasure of meeting him, and find him to be both personable and exceptionally talented. He also happens to be from Valencia, Spain, where my wife’s sister and her husband live. Small world!

While there, we noticed that the iconic department store Bergdorf Goodman was celebrating its 125th anniversary. And they were certainly making a big deal of it! There were displays throughout the store highlighting this remarkable milestone.

We also had lunch at the famous Russian Tea Room, which happens to be celebrating its 100th anniversary this year! Interestingly, we saw nothing acknowledging the occasion. Quite a contrast to Bergdorf Goodman. Well, I guess to each their own.

At TSG, we love celebrating anniversaries, particularly those that represent significant milestones. Which brings me to something we’re especially excited about.

PMAR XXV!

Next June, we’ll celebrate the 25th anniversary of our annual Performance Measurement, Attribution & Risk (PMAR) Conference.

For a quarter of a century, PMAR has brought together investment professionals to explore timely topics, exchange ideas, and learn from leading experts in our industry.

The conference has certainly evolved since its inaugural event. We’ve introduced new topics, new formats, and new ideas. But one thing hasn’t changed: our commitment to delivering a valuable experience for our attendees while providing meaningful opportunities for our cosponsors.

Twenty-five years is a milestone we’re extremely proud of, and one we intend to celebrate. Over the coming months, we’ll be highlighting this achievement in a variety of ways, looking back at some memorable moments while also looking ahead to what’s next.

To everyone who has participated over the years, our speakers, cosponsors, attendees, and TSG team members, thank you for helping make PMAR what it is today.

We look forward to welcoming you to PMAR XXV, June 9–10, 2027, in New Brunswick, New Jersey.

In the meantime, to learn more about the conference, please visit: https://tsgperformance.com/events/pmar/

“And the day came when the risk to remain tight in a bud was more painful than the risk it took to blossom.”

— Anaïs Nin

That’s a Good Question: Trust, But Verify: Even When It’s AI

By Patrick W. Fowler

AI has earned its place. It drafts in minutes what used to take hours, summarizes dense research, and helps us think through problems from new angles. But fast isn’t the same as right.

Twice recently, our team got AI answers that sounded authoritative and were simply wrong. Asked to outline the SEC Marketing Rule’s predecessor performance requirements, ChatGPT listed “substantially similar personnel” first. The rule says no such thing. It requires that the person or persons primarily responsible for the prior performance manage accounts at the advertising adviser. When challenged, the AI simply apologized. In another case, a colleague asked AI for help with a list of words for their child’s schoolwork, and it confidently produced a list of the wrong words. Different stakes, same lesson: the answer looked comprehensive, and it wasn’t right.

No harm was done, because someone checked. AI predicts what a good answer should look like, and when it lacks the facts, it fills the gap with something plausible. In a business built on accuracy, we can’t pass those “hallucinations” along.

Three Habits

1. Give it the source. AI is far more reliable summarizing a document you provide than answering from memory.

2. Check every citation and number. Open the link, read the rule, recalculate the figure.

3. Own the output. If your name is on it, you’ve verified it.

Prompts Worth Borrowing

• “Answer only from the document I’ve attached. If it isn’t there, say so.”

• “Cite the source for each claim and flag anything you’re unsure of.”

• “If you can’t verify this, tell me rather than guessing.”

Treat AI like a brilliant new colleague: grateful for the help, and still checking the work. As we tell our clients: trust, but verify.

Does the SEC Marketing Rule Really Require All of These Disclosures?

CFA Institute’s publication, Reconciling the GIPS® Standards and the SEC Marketing Rule, identifies 11 disclosures that are not required by the GIPS standards but may be required by the SEC Marketing Rule, depending on the facts and circumstances, when a firm distributes a GIPS Report as an advertisement.

But are all 11 actually required?

A review of Rule 206(4)-1 and its Adopting Release suggests a more nuanced answer. Many of these disclosures are not expressly mandated by the text of the Rule. Instead, their necessity often derives from the Rule’s general prohibitions, particularly paragraph (a)(1), which prohibits omitting a material fact necessary to make a statement, in light of the circumstances, not misleading, and paragraph (a)(6), which prohibits including or excluding performance results, or presenting performance periods, in a manner that is not fair and balanced.

This distinction is important. The Marketing Rule is intentionally principles-based. Rather than prescribing a disclosure for every situation, it frequently requires advisers to determine what information is necessary, given the facts and circumstances, to prevent an advertisement from being misleading.

Here’s my take on the CFA Institute list:

Reinvestment of income — Generally necessary.
If presented returns assume the reinvestment of income, failing to disclose that fact could leave the reader with an incomplete understanding of how the performance was calculated. Because reinvestment will generally increase cumulative performance, the assumption may be material to understanding the results. This is best viewed through paragraph (a)(1). If income is not reinvested, however, the need for a specific disclosure may be different.

Effect of market or economic conditions — Generally necessary when material.
The SEC has long been concerned about performance presentations that omit relevant market or economic context in a manner that could mislead investors. Where market conditions are material to understanding the performance shown, paragraph (a)(1) may require appropriate context.

Benchmark comparison disclosures — Facts and circumstances.
A benchmark comparison must not create a misleading impression. If differences between the portfolio and benchmark, or other facts concerning the comparison, are material to understanding it, they should be disclosed. If the comparison is readily understandable and speaks for itself, however, additional disclosure may not necessarily be required.

Description of the return presented — Generally necessary.
Readers need to understand what the performance figure represents. This follows both from the Rule’s specific performance requirements, including its treatment of gross and net performance, and from the broader obligation not to present performance in a misleading or unfair and unbalanced manner.

Current performance — Facts and circumstances.
Performance that has become stale may create a misleading impression, particularly where more recent performance would materially change the story being told. This is principally a general-prohibitions issue rather than a universal requirement that every advertisement present performance through the most recent possible date.

Criteria for related performance/composites — Generally necessary when material.
The Marketing Rule is particularly concerned with selective performance presentation. Appropriate disclosure concerning the criteria used to determine which portfolios are included can help demonstrate that the presentation is not cherry-picked. The amount of disclosure needed, however, should depend upon the circumstances and how readily the selection criteria can otherwise be understood.

Extracted performance — Disclosure may be necessary.
Extracted performance presents particular risks because the recipient is seeing only a portion of a portfolio’s results. Appropriate identification and explanation may therefore be necessary to prevent the presentation from being misleading. The Rule also contains specific requirements applicable to extracted performance.

Cash allocation for extracted performance — Generally necessary when material.
How cash is treated can materially affect an extracted performance calculation. If the allocation methodology affects the reader’s understanding of the results, disclosure is appropriate under the general prohibitions.

Hypothetical performance — Specifically addressed by the Rule.
Unlike many of the items above, hypothetical performance is expressly governed by paragraph (d)(6). An adviser presenting hypothetical performance must satisfy specific conditions, including policies and procedures designed to ensure that the performance is relevant to the likely financial situation and investment objectives of the intended audience and the provision of specified information concerning the hypothetical performance.

What About the Other Two?

I am less convinced that the following represent disclosures that are necessarily required by the Marketing Rule:

Possibility of loss.
There is no general requirement in Rule 206(4)-1 that every performance advertisement contain a standalone statement that investments may lose money. Such a disclosure could certainly be appropriate in some circumstances, particularly under the Rule’s fair-and-balanced treatment of material risks and limitations, but that is different from saying it must appear in every GIPS Report used as an advertisement.

Portfolio-by-portfolio related performance.
The Rule imposes requirements on the presentation of related performance, but that does not necessarily translate into a universal disclosure requirement concerning portfolio-by-portfolio performance. Whether additional information is needed should depend on the nature of the performance presentation and whether its omission would make the advertisement misleading.

The Bottom Line

The distinction between “expressly required” and “necessary to comply” matters.

Some disclosures are specifically mandated by the Marketing Rule. Others may effectively become necessary because, without them, a particular advertisement could be misleading, unbalanced, or incomplete under the Rule’s general prohibitions. Still others may not be necessary at all, depending on the facts and circumstances.

Consequently, I would hesitate to treat the CFA Institute list as 11 mandatory disclosures that must automatically be added to every GIPS Report. A better approach is to ask of each item:

Is this information expressly required by the Rule, or is it necessary in these particular circumstances to ensure that the performance presentation is not misleading and is fair and balanced?

That distinction is precisely what one should expect from a principles-based rule.

Special thanks to Lance C. Dial, Esq., Partner, K&L Gates LLP, for sharing his insights and perspective on the SEC Marketing Rule for this edition of Compliance Corner.

What to Expect From TSG in 2026

For information on the 2026 / 2027 events and partnership opportunities, please contact Patrick Fowler at 732-873-5700

As a reminder, all TSG verification clients receive full, unlimited access to our Insiders.TSGperformance.com site filled with tools, templates, checklists, and educational materials designed to make compliance and verification as easy as possible for you and your firm.

Contact CSpaulding@TSGperformance.com if you have any questions or are having trouble accessing the site.

David Copperfield, by Charles Dickens

Review by David Spaulding, DPS, CIPM

Every so often, I will pick up a classic to read or re-read. In this case, I listened: for over 36 hours. But, it was excellent.

My motivation for reading (sorry, listening to) it was another book I had listened to: Straight Man, by Richard Russo. In it, the main character’s father, William Henry Deveraux, Sr., is a famous (and rather intimidating) literary critic and academic. For most of his career, he was known for dismissing or disliking Dickens. He believed he was inferior or overrated. Though, later in the novel, he undergoes a change of heart, and tells his son, Hank, that he believes he “sinned against Dickens.” For whatever reason, this was sufficient to get me to read and/or listen to his books. I recently finished Hard Times, which was one of Dickens’ shortest novels; David Copperfield is anything but short.

Told in the first person, David Copperfield is the story of one man’s journey from a troubled childhood to a fulfilling adulthood, exploring themes of resilience, character, love, and redemption against the backdrop of Victorian England.

What struck me most was Dickens’ extraordinary ability to create memorable characters. By the end of the novel, they felt less like fictional creations and more like people I had known. Copperfield’s aunt, Betsey Trotwood; the “character” Wilkins Micawber; his wonderful nurse, Peggotty; Copperfield’s “sister,” Agnes Wickfield; the villain, Uriah Heep; and the enigmatic James Steerforth each possess such distinct personalities that they remain vivid long after the story ends.

Steerforth, in particular, fascinated me. From early on I sensed there was something deeply unsettling beneath his charm and confidence. I found myself frustrated that David could not see what seemed increasingly obvious.

The novel also struck me emotionally. My first wife died six years ago, and I found the chapters surrounding Copperfield’s wife Dora’s illness and death profoundly moving. I was listening while driving and, more than once, found myself wiping away tears. Dickens handled those scenes with remarkable tenderness and humanity.

As I said at the start, I listened to David Copperfield, but I now intend to read it in print. From the listening I could see what an exceptional writer Dickens was, and I want to spend time focusing more on it rather than just the story.

Of course I recommend it. Exceptional writing and a great story.