SEC Approves FINRA Rule Change Permitting Projected Performance and Targeted Returns in Broker-Dealer Communications

Key Takeaways

• On October 15, 2026, the SEC approved amendments to Financial Industry Regulatory Authority (FINRA) Rule 2210 that will permit broker-dealers to communicate projected performance and targeted returns, subject to conditions.
• The rule change does not extend to backtested, model, related, or extracted performance and generally excludes mass-audience or general retail communications.
• Broker-dealers relying on the rule change must adopt reasonably designed written policies and procedures regarding communications, disclose assumptions and risks, and retain records identifying the source of projections and targets.
• Dual registrants will not be able to substitute compliance with the Investment Adviser Marketing Rule for compliance with the new Rule 2210. 

On October 15, 2026, the U.S. Securities and Exchange Commission (SEC) approved amendments to Financial Industry Regulatory Authority (FINRA) Rule 2210 (Communications with the Public) (Rule 2210) that will permit member broker-dealers to communicate projected performance and targeted returns to certain investors, subject to specified conditions.¹

The amendments are particularly significant for private fund sponsors and the broker-dealers that distribute their funds, including third-party placement agents. Although investment advisers may present projected performance and targeted returns to appropriate investors as hypothetical performance under the SEC’s Investment Adviser Marketing Rule, Rule 206(4)-1 (Marketing Rule), broker-dealers generally have been prohibited from distributing adviser-prepared materials containing the same information. The approved amendments help to address this longstanding regulatory mismatch.

The approved amendments also reflect significant revisions to FINRA’s original proposal, as discussed in our February 2026 Update, in response to industry comments.

What the Approved Rule Permits

The amended Rule 2210 adds a new exception to the rule’s content standards permitting broker-dealers to communicate projected performance, which generally reflects an estimate of future investment performance based on historical data, assumptions, or mathematical modeling, and targeted returns, which reflect aspirational performance goals, with respect to a security, securities portfolio, or asset allocation or other investment strategy.

The new exception remains narrower than the Marketing Rule's treatment of hypothetical performance. In particular, the amendment does not extend the exception to backtested, model, related, or extracted performance, which investment advisers generally may present to appropriate investors under the Marketing Rule.  While FINRA interpretive letters allow broker-dealers to provide model and related performance to “institutional investors” under certain circumstances, no FINRA guidance to date has permitted backtested or extracted performance.

Broker-dealers seeking to rely on the new exception must satisfy the following conditions:

• Written Policies and Procedures and Intended Audience. Broker-dealers must adopt and implement written policies and procedures reasonably designed to ensure that communications containing projected performance or targeted returns are relevant to the likely financial situation and investment objectives of the intended audience. Under such reasonable policies and procedures, FINRA expects communications containing projected performance and targeted returns to be distributed to investors who have sufficient resources to independently evaluate the information and who have the financial expertise to understand the risks and limitations of such communications. As a result, the exception is expected to apply primarily to sophisticated investors.
  
  FINRA did not define what investors would meet this sophistication standard, so broker-dealers will need to adopt standards for identifying those investors, whether it be institutional investors, qualified purchasers, or some other standard. Firms should account for differing financial circumstances, investment objectives, and levels of sophistication when determining the appropriate audience for such communications. These audience considerations take on added significance in light of the SEC’s broader efforts to expand retail investor access to the types of alternative investments that are most likely to use projected performance or target returns.
• Disclosure Requirements. Broker-dealers must provide sufficient information for the intended audience to understand (i) the criteria used and assumptions made in calculating the projected performance or targeted returns and (ii) the risks and limitations of using that information in making investment decisions. The appropriateness of the disclosures will depend on the investment, the nature of the communication, and the intended audience.
• Recordkeeping Requirements. Broker-dealers will be required to maintain records concerning the source of any projected performance or targeted return used in their communications for at least three years, with the records kept in an easily accessible place for the first two years.

Key Changes From the February Proposal

In response to industry comments, FINRA modified several requirements included in its original February 2026 proposal.

• Removal of the Express Reasonable-Basis Requirement. FINRA eliminated the proposed stand-alone requirement that broker-dealers have a reasonable basis for the criteria and assumptions used to calculate projected performance or targeted returns and retain written records supporting that basis.
  
  FINRA concluded that a separate requirement was unnecessary because Rule 2210’s existing general content standards already prohibit unreasonable or misleading projections. FINRA also clarified that broker-dealers generally need not independently verify every criterion or assumption underlying projections prepared by investment advisers or other third parties. They must nevertheless evaluate the source of the information, assess the available support, and satisfy themselves that the presentation complies with Rule 2210.
  
  The SEC emphasized that these general content standards effectively require firms to substantiate the projections they distribute and that, in most cases, firms would be unable to demonstrate compliance without records supporting the underlying criteria and assumptions.
• Modification of Disclosure Requirements. FINRA also removed express requirements to disclose (i) whether projected performance or targeted returns are net of anticipated fees and expenses and (ii) why actual performance may differ from projected results.
  
  Those disclosures may nevertheless be necessary under the remaining disclosure requirements and Rule 2210’s general content standards, which require communications to be fair, balanced, and not misleading. FINRA generally expects investors to receive sufficient information to determine whether figures are net of anticipated fees and expenses and to understand why actual results may differ, with the level of detail tailored to the particular communication and audience.

Limits of the Amendments

Although the amendments provide greater flexibility for FINRA member firms, the exception remains subject to several important limitations:

• No Full Harmonization With the Marketing Rule. FINRA declined to extend the exception to permit broker-dealers to communicate backtested, model, related, and extracted performance, which investment advisers may present under the Marketing Rule, subject to applicable conditions. FINRA described the change as incremental and did not foreclose future expansion, and, as discussed above, existing FINRA interpretive letters allow use of model and related performance under some circumstances with institutional investors.
• No Investor-Category Safe Harbors. FINRA declined to deem communications to institutional investors, qualified purchasers, accredited investors, or other defined categories of investors automatically permissible under the amended rule. Firms must determine whether the communication is appropriate for the intended audience under their own written policies and procedures.
• No Automatic Reliance on the Marketing Rule. FINRA indicated that adviser-prepared materials that comply with the Marketing Rule would not necessarily satisfy amended Rule 2210. Broker-dealers must review adviser-prepared materials under the applicable FINRA standards prior to distribution.
• Other Regulatory Obligations Remain. FINRA indicated that because Rule 2210’s new exception applies to communications broadly rather than just recommendations, a suitability determination under Rule 2111 would not necessarily satisfy Rule 2210. Similarly, to the extent a broker-dealer determines that retail investors may receive projected performance and targeted returns communications under Rule 2210, obligations under Regulation Best Interest will attach.

Takeaways for Private Fund Sponsors and Broker-Dealers
For private fund sponsors, the amendments may reduce the need to prepare separate versions of marketing materials for distribution through third-party placement agents and other broker-dealers. Sponsors should coordinate with distributors to make relevant assumptions, methodologies, risk disclosures, and supporting information available for compliance review.

Broker-dealers seeking to rely on the new exception should review their compliance frameworks in the following areas:

• Audience Policies. Develop and implement written supervisory procedures governing the intended audience and distribution of communications containing projected performance or targeted returns. FINRA permits grouping investors based on relevant characteristics and coordinating these procedures with institutional suitability policies under Rule 2111(b), provided the requirements of both rules are addressed.
• Dual Registrants. Firms operating as both broker-dealers and investment advisers may have greater flexibility to prepare common marketing materials across their brokerage and advisory businesses. However, compliance with the Marketing Rule does not automatically satisfy Rule 2210. Dual registrants should consider coordinating their compliance procedures and marketing review processes to review whether the materials satisfy the distinct regulatory requirements applicable to each business.
• Compliance Review and Disclosures. Identify permitted projections and targeted returns and distinguish them from other performance categories outside the new exception that may appear in the same adviser-prepared materials. Confirm that the communications and required risk disclosures are fair, balanced, and not misleading, consistent with Rule 2210’s general content standards.
• Third-Party Performance Information. Assess the source and available support for projections and targets prepared by investment advisers or other third parties. FINRA generally does not expect firms to independently verify every underlying assumption, but broker-dealers remain responsible for compliance with Rule 2210.
• Recordkeeping. Document the source of projected performance or targeted returns and retain sufficient supporting information.

The SEC’s October 15, 2026 approval order does not specify an effective date; FINRA has stated that it will announce the effective date in an upcoming Regulatory Notice.  FINRA has also indicated that it may consider additional guidance now that the rule is approved.  Firms should monitor FINRA announcements concerning implementation and any additional guidance that may be published. 

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¹U.S. Securities and Exchange Commission, Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Order Approving a Proposed Rule Change, as Modified by Partial Amendment No. 1, to Amend FINRA Rule 2210 (Communications with the Public), Release No. 34-106675; File No. SR-FINRA-2026-004 (filed Oct. 15, 2026), available at https://www.sec.gov/files/rules/sro/finra/2026/34-106675.pdf.