FINRA will announce the effective date of the amendments in a Regulatory Notice, which remains pending.
FINRA RULE 2210 AND THE MARKETING RULE
The amendments to Rule 2210 are the culmination of years of efforts to provide broker-dealers with greater flexibility in communicating projected performance and targeted returns, including FINRA’s initial consideration of changes to its restrictions on projected performance in 2023,[2] the reproposed amendments of February 2026,[3] and FINRA’s various interpretive positions over the years affording greater flexibility for certain institutional communications.[4]
FINRA Rule 2210(d)(1)(F) as currently drafted prohibits broker-dealers from including predictions or projections of performance in communications with the public, subject to narrow exceptions. The limited exceptions to this general prohibition permit (1) illustrations of certain mathematical principles (such as the effect of interest compounding over time), (2) investment analysis tools, and (3) price targets in research reports.
Historically, broker-dealers have sought to fit communications within these narrow exceptions or otherwise sought interpretive guidance regarding narrow additional permissions. Newly amended Rule 2210(d)(1)(F)(iv) adds a fourth, conditional exception for projected performance and targeted returns, providing member firms greater flexibility to include predictions or projections of performance in communications.
The general prohibition against including predictions or projections of performance in communications has long been a source of tension in the investment management industry, particularly in the private funds space, where investment advisers may include hypothetical performance (including projected performance and targeted returns) in their marketing materials under the Marketing Rule, but broker-dealers distributing those same materials may not include such information in written communications with the public.[5]
CONDITIONS FOR INCLUDING PROJECTED PERFORMANCE AND TARGETED RETURNS
New Rule 2210(d)(1)(F)(iv) would permit broker-dealers to include projected performance and targeted returns for securities, securities portfolios, asset allocations, or other investment strategies in communications with the public, subject to the following conditions:
- Written policies and procedures. The broker-dealer must adopt and implement written policies and procedures “reasonably designed to ensure that the communication is relevant to the likely financial situation and investment objectives of the intended audience of the communication.” This standard closely tracks the Marketing Rule’s requirement for advertisements containing hypothetical performance.[6] Accordingly, dually registered firms may be able to leverage existing Marketing Rule policies and procedures, with appropriate modifications to address Rule 2210. As under the Marketing Rule, firms may assess the intended audience by grouping investors into categories or types, rather than evaluating each investor individually.[7] Firms should consider whether the intended audience has the financial expertise and resources to understand the projections and their risks and limitations. The exception is not limited categorically to institutional investors, but it generally would not be appropriate for mass-market communications or general retail advertising.[8]
- Disclosure requirements. The communication must provide sufficient information to enable the intended audience to understand “(i) the criteria used and assumptions made in calculating the projected performance or targeted return; and (ii) the risks and limitations of using the projected performance or targeted return in making investment decisions.” These disclosure requirements closely track the Marketing Rule’s requirements for advertisements containing hypothetical performance, which similarly require disclosure of the criteria and assumptions underlying the performance information and the risks and limitations of relying on it in making investment decisions.[9]
Notably, these conditions will operate alongside the existing general content standards of Rule 2210(d)(1), which will otherwise remain unchanged and still apply to all member communications.
KEY CHANGES FROM FINRA’S FEBRUARY 2026 PROPOSAL
As discussed in our prior LawFlash, FINRA’s February 2026 proposal included certain requirements that went beyond the SEC’s Marketing Rule. In response to industry comments, FINRA revised several aspects of the proposal before SEC approval:
Reasonable Basis Requirement
FINRA removed the proposal’s express requirement that firms have a reasonable basis for the criteria and assumptions used in calculating projected performance or targeted returns. The SEC nevertheless concluded that Rule 2210’s existing content standards effectively require firms to substantiate those criteria and assumptions.
Supporting Records
FINRA also eliminated the proposal’s specific requirement to maintain written records substantiating the reasonable basis for calculations. Firms must still retain information concerning the source of projected performance or targeted returns under amended Rule 2210(b)(4)(A)(iv). FINRA indicated that, in most cases, firms would be unable to demonstrate compliance without records supporting the underlying criteria and assumptions.
Fees and Differences from Actual Results
FINRA removed the proposed express requirements to state whether projections or targets are net of anticipated fees and expenses and identify reasons actual results could differ. Firms must nevertheless provide disclosures sufficient to satisfy Rule 2210’s general content standards.
Scope of the Exception
The final amendments continue to address only projected performance and targeted returns, rather than the full range of hypothetical performance covered by the Marketing Rule. The amended rule still does not create a general exception for back-tested or model portfolio performance as permitted under the Marketing Rule, despite industry requests for full alignment with the SEC’s definition of hypothetical performance under the Marketing Rule.
Third-Party Materials
For projections prepared by investment advisers, sponsors, or other third parties, FINRA generally would not expect broker-dealers to independently recalculate every assumption. Firms must, however, evaluate the source, assess whether available information supports the presentation, and determine that the communication satisfies Rule 2210. In other words, broker-dealers will have an obligation to at least make sure third-party content passes the proverbial “smell test” and cannot simply reuse third-party information on blind faith alone.
This expected standard of care is no different to that applicable to third-party content generally. The appropriate diligence is facts-and-circumstances dependent. Separately, the amendments to Rule 2210(b)(4)(A)(iv) require retention of information concerning the source of any projection or targeted return used in a communication.
RELATIONSHIP TO THE INVESTMENT ADVISER MARKETING RULE
As we explained in our prior LawFlash, many in the investment management industry generally favored full alignment between Rule 2210 and the hypothetical performance framework under the Marketing Rule. The final amendments are a welcome development and move the regimes meaningfully closer together, particularly by eliminating several express requirements in the February 2026 proposal that went beyond the Marketing Rule. The amended Rule 2210 nevertheless falls short of full alignment with the Marketing Rule.
The Rule 2210 exception remains limited to projected performance and targeted returns, rather than the full range of hypothetical performance covered by the Marketing Rule, including back-tested performance and model portfolio performance. Further, compliance with the Marketing Rule does not create a safe harbor for adviser-prepared materials distributed by a broker-dealer. As a result, dually registered firms and placement agents must continue to evaluate those materials under Rule 2210 independently. Accordingly, while the amendments should ease longstanding friction in the distribution of private fund and other investment materials, the amended Rule 2210 does not fully align with the Marketing Rule and further harmonization would be beneficial.
FINRA RULE 2210 MODERNIZATION
These amendments also arrive amid FINRA’s broader consideration of Rule 2210.[10] Through its FINRA Forward rule modernization initiative, FINRA has solicited feedback on whether aspects of Rule 2210 should be updated to reflect evolving communications practices and reduce unnecessary differences between broker-dealer and investment adviser requirements.
The targeted exception for projected performance and targeted returns is therefore an important step, but it should not be viewed as the end of FINRA’s consideration of more comprehensive changes to Rule 2210.
PRACTICAL IMPLICATIONS FOR BROKER-DEALERS
On balance, the amended Rule 2210 is a positive development for the investment management industry and an improvement that broker-dealers have been awaiting for some time. Investors will also benefit from having access to a broader range of information as well as information that is more consistent between broker-dealers and investment advisers.
In light of the amended Rule 2210, broker-dealers should consider the following practical implications:
- Supervisory procedures and disclosures. Broker-dealers should update their Rule 2210 supervisory procedures and review projection methodologies, assumptions, fee treatment, downside risks, and consistency across pitch books, private placement materials, and other investor communications.
- Intended audience and distribution controls. Firms should establish documented criteria for determining whether projected performance and targeted returns are relevant to the likely financial situation and investment objectives of the intended audience. Investor sophistication, financial resources, and the ability to evaluate risks and limitations may inform that assessment. Institutional or accredited investor status can be helpful in that analysis, but should not alone be treated as an automatic safe harbor.
- Third-party materials and recordkeeping. Firms using sponsor- or adviser-generated projections are not expected to independently verify all of the criteria and assumptions underlying those projections. Rather, the level of due diligence will depend on the facts and circumstances, including the source of the information, whether the available information supports the projection, and whether the presentation satisfies Rule 2210’s general content standards. Firms should also consider whether additional information from the third party is necessary to satisfy their obligations under Rule 2210 and must maintain records concerning the source of the projected performance or targeted returns used in the communication.
- Other obligations and implementation. The amendments to Rule 2210 do not displace other applicable requirements, including Regulation Best Interest when a retail recommendation is made. Firms should await FINRA’s Regulatory Notice announcing the effective date and monitor any interpretive guidance before deploying revised materials.
- Examination readiness. Given FINRA’s examination program, firms should be prepared to demonstrate how their written supervisory procedures, audience assessments, disclosures, and review processes satisfy the amended rule. Additional detail concerning FINRA’s expectations may develop through examinations and subsequent guidance.
HOW WE CAN HELP
If you have questions about how these amendments may affect your firm, or if you are interested in submitting a comment letter, please contact the authors of this LawFlash.
