NASD Issues Interpretive Letter Prohibiting The Use Of Related Performance Information In Hedge Fund Sales Materials

Mondaq Business Briefing, October, 2003 by Stephanie Breslow

By Stephanie Breslow, David Efron, Steve Fredman, Kenneth Gerstein, Kelli Moll, David Nissenbaum, Paul Roth and Marc Weingarten

On October 2, the National Association of Securities Dealers, Inc. (the "NASD") issued an interpretive letter to the Securities Industry Association (the "Interpretation"). Among the conclusions set forth in the Interpretation was the NASD's view that Rule 2210 of its Conduct Rules prohibits a member from publishing or distributing hedge fund sales materials that present related performance information, even if a non-member, such as a hedge fund manager, prepared the sales materials. The Interpretation also provides that members must not use any hypothetical or backtested performance that does not reflect the actual performance of the hedge...