Performance advertising remains an SEC enforcement priority and can be a minefield for hedge fund managers.  See “OCIE Director Andrew Bowden Identifies the Top Three Deficiencies Found in Hedge Fund Manager Presence Exams and Outlines OCIE’s Examination Priorities,” Hedge Fund Law Report, Vol. 7, No. 38 (Oct. 10, 2014).  The use of hypothetical or backtested performance is particularly problematic.  See “Under What Conditions Can a Hedge Fund Manager Present Hypothetical Backtested Performance Results?,” Hedge Fund Law Report, Vol. 6, No. 5 (Feb. 1, 2013).  Consistent with these regulatory priorities, the SEC recently settled an enforcement proceeding against an investment adviser whose founder claimed that the adviser’s strategy had been used to manage actual client assets since 2001, even though the strategy was not devised until late 2008.  The claimed performance was, in fact, backtested.  This article discusses the enforcement action.  For a discussion of other performance advertising issues, see the HFLR’s articles on GIPS compliance claims, testimonials and social media, cherry picking and case studies, use of gross performance results and use of other firms’ track records.