FINRA Proposes to Permit Projected Performance and Targeted Returns in Member Communications

On February 10, 2026, the Financial Industry Regulatory Authority (FINRA) filed with the SEC proposed amendments to Rule 2210 (Communications with the Public).¹ Currently, Rule 2110 generally prohibits the use of “predictions and projections” in written communications with the public. The proposal would create a conditional exception to this general prohibition allowing a member broker-dealer to project performance or provide a targeted return with respect to a security, a securities portfolio, or an asset allocation or other investment strategy. FINRA’s proposal is intended to align Rule 2210 more closely with the SEC Investment Adviser Marketing Rule, Rule 206(4)-1 (Marketing Rule), which permits (subject to certain restrictions) the presentation of “hypothetical performance” projections, which include projected performance and targeted returns, by federally registered investment advisers in written communications to investors.² The proposed rule change is particularly important for broker-dealers that distribute private funds sponsored by investment advisers because it will facilitate broker-dealers’ ability to use marketing materials containing the same types of “targeted returns” or “projected performance” that investment advisers are able to use under the Marketing Rule.

This proposal is aimed at a longstanding private funds distribution pain point. Investment advisers often prepare fund marketing materials to comply with the Marketing Rule, including the Rule’s approach to hypothetical performance, but broker-dealers have faced constraints using those same materials where they include projected performance or targeted returns because of Rule 2210. Securities industry participants have long urged FINRA to harmonize Rule 2210 and the Marketing Rule, and the proposed amendments are intended to reduce that mismatch by adopting conditions that align more closely with the Marketing Rule’s “intended audience” tailoring requirement for hypothetical performance.

Communications to Mass Audiences Would Remain Out of Scope

FINRA is explicit that the proposed amendments are not a green light for broker-dealers to present projected performance or targeted returns in communications that are directed to a mass audience or intended for general circulation (including a general retail investor audience). The proposed amendments track limitations within the Marketing Rule, which only permits use of “hypothetical performance,” including projected performance or targeted returns, where the “intended audience” includes only potential investors for whom the communication is appropriate, given the potential investors’ objectives, investment experience, and knowledge. FINRA states that for communications available to mass audiences, a member generally could not form an expectation that the communication is relevant to the likely financial situation and investment objectives of the intended audience. FINRA provides that communications presenting projected performance or targeted returns should be distributed only where the member reasonably believes the intended investors have the financial expertise and resources to understand the risks and limitations.

Conditions for Using Projections or Targeted Returns

FINRA proposes to permit projected performance and targeted returns only if the member satisfies specified conditions focused on (i) audience tailoring, (ii) reasonable diligence/validation and documentation, and (iii) disclosures.

Specifically, the proposed exception would require that the member do the following:

• Adopt and implement written policies and procedures reasonably designed so that the communication is relevant to the likely financial situation and investment objectives of the intended audience. FINRA notes that members may “group” investors into categories based on reasonable judgment, but the communication must still be appropriate for the intended audience.
• Have a reasonable basis for the criteria used and assumptions made in calculating the projection or targeted return and retain written records supporting that reasonable basis; in other words, the member cannot simply adopt an investment adviser’s projections or targets without performing due diligence on their reasonableness.
• Provide sufficient information for the intended audience to understand (i) the criteria and assumptions used (including whether the projected performance or targeted return is net of anticipated fees and expenses) and (ii) the risks and limitations of using the projection/target in making investment decisions, including reasons why the projections or targets might differ from actual performance.

FINRA also emphasizes that communications relying on the exception, including any marketing materials prepared by an investment adviser but circulated by the broker-dealer, become the broker-dealer’s communications and remain subject to the general standards of Rule 2210, including that communications be fair and balanced and not misleading.

Reasonable Supervision

If the SEC approves this rule change, members should review supervisory procedures to confirm the reasonableness of supervisory systems including (i) supervisory review of projected performance or targeted returns used in communications, (ii) review of third-party models or software used in creation of projected performance or targeted returns, and (iii) reasonableness of recommendations involving projected performance or targeted returns and applicable duties of care, including Regulation Best Interest.

Why This Matters for Private Fund Sponsors and Distributor Broker-Dealers

If adopted, the proposal should make it easier for distributor broker-dealers (including placement agents) to use investment adviser-prepared private fund marketing materials that include projected performance or targeted returns. To do so, the broker-dealer must conduct and document reasonable basis due diligence on those projections and targets, provide the required disclosures allowing assessment of the projections and targets and the risks to achieving those results, and review the overall fairness and balance of the marketing materials and must appropriately tailor distribution of the materials and not direct it to mass retail audiences.

Next Steps

This proposal, which FINRA filed on February 10 with the SEC, will be published for comment in the Federal Register in the near future. In general, the SEC has 45 days from the date of publication, unless the SEC issues a notice or order extending the review period, to approve or disapprove the proposed rule change or institute proceedings to determine whether the rule change should be disapproved.

¹ Financial Industry Regulatory Authority, Inc., Proposed Rule Change to Amend FINRA Rule 2210 (Communications with the Public), SR-FINRA-2026-004 (filed Feb. 10, 2026), available at https://www.finra.org/sites/default/files/2026-02/SR-FINRA-2026-004.pdf.

² Although FINRA describes the proposal as intended to “align more closely” with the Marketing Rule, the frameworks are not fully parallel. Most significantly, the Marketing Rule’s “hypothetical performance” concept is broader and may include model performance and back-tested performance, while FINRA’s proposed exception would be limited to projected performance and targeted returns and would not extend to model or back-tested performance.