FINRA Proposes Amendment to Permit Performance Projections and Targeted Returns in Broker Dealer Communications

February 25, 2026

On February 10, 2026, the Financial Industry Regulatory Authority, Inc. (“FINRA”) proposed amendments to FINRA Rule 2210 (Communications with the Public) that would permit member broker‑dealers to include performance projections and targeted returns in communications with investors, subject to new conditions (the “Proposed Amendment”). If approved by the Securities and Exchange Commission (“SEC”), the Proposed Amendment would more closely align Rule 2210 with the SEC’s marketing rule for SEC‑registered investment advisers (the “Marketing Rule”).

Background

FINRA Rule 2210 currently prohibits broker‑dealers from using projections of performance or targeted returns in their communications1, subject to specified exceptions2, including the allowance for hypothetical illustration of mathematical principles, provided such illustration does not predict or project the performance of an investment or investment strategy.  Additionally, FINRA has historically treated targeted returns, often viewed as aspirational and based on fewer assumptions than full projections, as a form of projection subject to the same prohibition.

Summary of the Proposed Amendment

The Proposed Amendment would permit broker‑dealers to include performance projections or targeted returns in communications regarding a security, a securities portfolio, an asset allocation or an investment strategy, provided specified conditions are met. Importantly, the Proposed Amendment does not set explicit investor‑qualification thresholds3. As drafted, the Proposed Amendment permits broader use of projections, including in communications relating to private funds relying on Section 3(c)(1) of the Investment Company Act. To take advantage of these changes, if implemented, member firms must adopt written policies and procedures reasonably designed to ensure such communications are provided only to appropriate audiences (i.e., those for whom the projections are relevant to their likely financial situation and investment objectives), retain written records supporting the  reasonable basis for the criteria used and assumptions made in calculating the projected performance or targeted return, and must provide sufficient information about the criteria used and assumptions made in calculating the projected performance or targeted return, including to indicate to consumers (i) whether the projected performance or targeted return is net of anticipated fees and expenses; and (ii) the risks and limitations of using the projected performance or targeted return in making investment decisions, including reasons why the projected performance or targeted return might differ from actual performance.

In the Proposed Amendment FINRA notes that it does not expect projections to be used in materials directed to a mass retail audience.  However, the Proposed Amendment does not categorically prohibit use with retail investors if all conditions are satisfied. FINRA also indicates that it intends to interpret audience‑appropriateness requirements consistently with the Marketing Rule’s standard for the use of hypothetical performance.

Conditions for Use of Projections and Targeted Returns in Communications with the Public

As with all communications with the public, member communications that contain projected performance or targeted returns must meet Rule 2210’s general standards, including the requirements that communications be fair and balanced, provide a sound basis for evaluating the facts in regard to any particular security or type of security, and not contain false, exaggerated, unwarranted, promissory or misleading content.4 To include projections or targeted returns in communications, a broker‑dealer would need to satisfy all of the following conditions:

1. Written Policies and Procedures

Adoption and implementation of written policies and procedures reasonably designed to ensure that communications containing projections or targeted returns are relevant to the likely financial situation and investment objectives of the intended audience. Firms should have a reasonable belief that recipients have the financial expertise and resources to understand the risks and limitations of such materials. Policies may categorize investors into reasonable groupings rather than requiring individualized analysis.

2. Reasonable Basis Requirement

Firms must have a reasonable basis for all criteria used and assumptions made in preparing the projection or target, and must maintain written records supporting that basis. FINRA does not mandate a specific methodology, but relevant considerations may include macroeconomic conditions, issuer financial performance, industry factors, asset‑quality assessments, and peer‑group comparisons. In addition, FINRA expects members to establish and maintain a supervisory system to achieve compliance with the reasonable basis standard.

3. Investor Information Requirements

Communications must provide sufficient detail to allow the intended audience to understand:

  • the criteria and assumptions underlying the projection or targeted return (including whether results are presented net of fees and expenses); and
  • the risks and limitations associated with relying on such information, including reasons actual performance may differ.

4. Oversight of Third‑Party Models

If a broker‑dealer relies on third‑party models, software, or analytics, it must maintain a supervisory system reasonably designed to ensure compliance with the Proposed Amendment. Firms must obtain adequate information about the third party’s assumptions and criteria and maintain written records supporting their use.

S&K Observations

The Proposed Amendment reflects FINRA’s continued effort to align its regulatory framework with the SEC’s securities regulations. If adopted, the Proposed Amendment would represent a meaningful step toward harmonizing FINRA Rule 2210 with the Marketing Rule by allowing broker‑dealers to present targeted returns and performance projections. This alignment would benefit investors seeking forward‑looking information, broker‑dealers that have long been constrained relative to their registered investment advisor counterparts, and private fund sponsors that rely on registered placement agents.

Interested parties have 21 days from the date of the Proposed Amendment’s publication to submit comments. Under the statutory timeframe, a decision by the SEC could be expected around or shortly after the third quarter of 2026; if the Proposed Amendment is approved, FINRA will announce the implementation date in a Regulatory Notice.

If you have any questions regarding the matters covered in this e-mail, please contact your primary Seward & Kissel partner or a member of the Investment Management Group at Seward & Kissel LLP.

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1 “Communications” consist of correspondence, retail communications, and institutional communications.  See FINRA Rule 2210(a)(1).  Correspondence means any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period.  FINRA Rule 2210(a)(2).  Retail communication means any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period.  FINRA Rule 2210(a)(5).  Institutional communication means any written (including electronic) communication that is distributed or made available only to institutional investors but does not include a member’s internal communications.  FINRA Rule 2210(a)(3).  FINRA Rule 2210(a) defines each of these three communication types as communications that are “distributed or made available” to investors, with the definitions varying based on the specific audience and number of investors to whom the communication is distributed or made available.

2 The general prohibition on projections does not preclude a member from employing an investment analysis tool, or a written report produced by an investment analysis tool, that includes projections of performance provided it meets the requirements of FINRA Rule 2214 (Requirements for the Use of Investment Analysis Tools).

3 FINRA previously proposed to amend Rule 2210 in November 2023. Such proposal, if approved, would have allowed the inclusion of performance projections, but only in institutional communications and in communications to qualified purchasers under Section 2(a)(51) of the Investment Company Act of 1940 with respect to private placements.

4 The Proposed Amendment does not address the treatment of back‑tested performance, which has been long viewed by FINRA as potentially misleading in retail communications, nor does it clarify whether FINRA intends to revisit existing guidance on the use of internal rate of return for partially realized portfolios in retail materials

 

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