← All rule pagesRule 206(4)-1(d)(7)
Performance: predecessor performance — substantially similar accounts, key personnel transferred
performancepredecessor-performanceportability
Excerpted verbatim from the rule
An advertisement may not include any predecessor performance unless: (i) the person or persons who were primarily responsible for achieving the prior performance results manage accounts at the advertising adviser; (ii) the accounts managed at the predecessor adviser are sufficiently similar to the accounts managed at the advertising adviser that the performance results would provide relevant information to clients or investors; (iii) all accounts that were managed in a substantially similar manner are advertised unless the exclusion would not result in materially higher performance results and the exclusion does not alter the presentation of any prescribed time periods; and (iv) the advertisement clearly and prominently discloses that the performance results were from accounts managed at another entity.
What violations look like
Pitch deck
An adviser who left a hedge fund in 2024 to launch their own RIA shows the hedge fund’s 5-year track record as their own.
Why it's flagged: For predecessor performance under (d)(7), the substantially-similar accounts must move with the personnel to the new firm. Just claiming the strategy without the underlying client relationships doesn’t satisfy the rule.
Compliant rewrite
Show only post-launch performance of accounts at the new firm. Predecessor performance can be shown only with detailed disclosure of which personnel transitioned, which accounts moved, and why the prior track record is representative of the new firm’s capabilities.
Brochure
Firm A merges with Firm B; the combined entity shows the combined predecessor performance as if it ran the merged AUM all along.
Why it's flagged: Mergers that don’t carry over the actual personnel responsible for the past returns can’t claim the pre-merger track record under (d)(7). Either firm’s track record alone is also problematic if either set of key personnel departed.
Compliant rewrite
Show only post-merger composite performance for the combined entity, with separate clearly-labeled appendices for the legacy track records of each predecessor where the responsible personnel remain on staff.
Run Rule 206(4)-1(d)(7) on your own copy.
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