A fundamental tenet of the SEC’s Marketing Rule – Rule 206(4)‑1 under the Investment Advisers Act of 1940 – is that advertisements must not contain materially misleading information. Presentation of performance information in compliance with the Marketing Rule remains a significant challenge for advisers – and a continuing focus of the SEC’s attention. In a recent enforcement proceeding, the SEC asserted that a hedge fund adviser ran afoul of the Marketing Rule and defrauded investors by presenting the performance of a single investor in a private fund as the fund’s performance, even though certain other investors in the fund did not participate in all profitable fund investments and the fund’s overall performance was much worse than the individual investor’s. This article details the facts that gave rise to the proceeding and the terms of the settlement. See “Third Marketing Rule Risk Alert and New Settlements Portend Vigorous Enforcement” (Jun. 6, 2024).