FINRA Projected Performance Proposal | Thayne Gould Insights
Vigilant Insights
Introduction
FINRA recently filed a proposal with the SEC to allow brokers to use hypothetical performance when advertising certain securities to institutional investors or qualified purchasers.
The proposal does include strict guidelines regarding when and how projections of performance or targeted returns may be used.
This proposal would align FINRA regulations more closely with the provisions of the SEC’s Marketing Rule.
Vigilant Director, Thayne Gould, provided commentary on the announcement in a recent InvestmentNews article.
Thayne Gould Insights
The article discusses the positive impact this Rule may have on dually registered RIAs that would be allowed to use hypothetical performance under the SEC Rule but may be prohibited under their FINRA registration.
Although the guidelines for the use of projected performance have similarities to the SEC’s Rule, Thayne discusses that the requirements are more restrictive. Describing the guardrails as narrow, Thayne feels that the best practice will likely be to adhere to the FINRA rule if there are situations that overlap the different marketing rules.
Vigilant’s Conclusion
There is still a potentially lengthy process until the Rule is finalized; the SEC must approve it, and they may open a public commenting period.
Broker Dealers should continue to use strict standards when creating and reviewing their marketing materials.
The use of projected performance and target returns should be considered carefully, and industry standards should always be applied.
As with any new Rule, we suggest you reach out to us to discuss the compliance implications this rule could have on your business (if finalized).