On October 15, 2026, the Securities and Exchange Commission (SEC) approved the Financial Industry Regulatory Authority’s (FINRA) proposed rule change, SR-FINRA-2026-004, as amended, adding a fourth exception to FINRA Rule 2210(d)(1)(F)’s longstanding prohibition on predicting or projecting performance. The amended language can be found here.
For fund sponsors, advisers, and placement agents, the change, once effective, will address a structural mismatch that has impacted private fund marketing since the SEC’s Marketing Rule took effect. An adviser could present targeted returns to a sophisticated prospect, but a registered broker-dealer selling the same interests could not.
Background
FINRA Rule 2210(d)(1)(F) generally prohibits member communications that predict or project performance, imply that past performance will recur, or contain exaggerated or unwarranted claims, opinions, or forecasts. FINRA has long interpreted the prohibition to cover targeted returns as well as projections.
Before the amendment, the rule contained three exceptions:
- Hypothetical illustrations of mathematical principles under Rule 2210(d)(1)(F)(i).
- Investment analysis tools and tool-generated reports that satisfy Rule 2214 under Rule 2210(d)(1)(F)(ii).
- Price targets in research reports on debt or equity securities under Rule 2210(d)(1)(F)(iii).
The amendment adds a fourth exception under Rule 2210(d)(1)(F)(iv).
FINRA’s rationale was practical. Institutional and other sophisticated customers routinely request forward-looking information, and investment advisers, unregistered intermediaries, and issuers may already provide it. The resulting disparity encouraged some issuers to route offerings away from registered broker-dealers and left investors with inconsistent information about the same investment depending on who delivered the materials.
What the Amendment Permits
New Rule 2210(d)(1)(F)(iv) permits a FINRA member to include performance projections and targeted returns in its communications with current and prospective investors for a security, securities portfolio, asset allocation, or other investment strategy, subject to conditions.
FINRA described a performance projection as an estimate of the future performance of an investment or investment strategy, often based on historical data and assumptions, and mathematical modeling. It described a targeted return as an aspirational performance goal for an investment or investment strategy.
The same conditions apply to both projections and targets.
Conditions for Using Projections and Targeted Returns
Written policies and audience controls
A member using projected performance or targeted returns 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 its intended audience. This language deliberately mirrors the Marketing Rule.
The communications generally should be limited to investors the member reasonably believes have the resources to independently analyze the information and the financial expertise to understand its risks and limitations.
The requirement is flexible rather than prescriptive
FINRA did not prescribe a single method for identifying an appropriate audience. A member may base its procedures on its experience with particular types of investors who request this information, group investors into categories, or limit communications to investors who have expressed interest in or previously invested in particular types of securities.
An investor’s interest in achieving high returns does not establish that projected performance is relevant to the investor’s financial situation and objectives.
FINRA expects the change primarily to affect institutional and other sophisticated investors and those members that serve them. The exception, however, is not limited to institutional customers and does not depend on whether a recommendation is made.
Required disclosures
A member must provide sufficient information for the intended audience to understand:
- The criteria used and the assumptions made in calculating the projected performance or targeted return.
- The risks and limitations of using that information in making investment decisions.
FINRA did not mandate a specific methodology or disclosure template. In most cases, however, sufficient disclosure will need to explain whether the presentation is net of anticipated fees and expenses and why results may differ from actual performance. The disclosure should be tailored to the intended audience.
Notably, FINRA stated that disclosures sufficient under the Marketing Rule will not necessarily satisfy Rule 2210.
Recordkeeping and source review
Member firms must maintain records supporting their reasonable basis for the projected performance or targeted return.
When a projection comes from a third party, including an affiliated or unaffiliated investment adviser, a member is not generally expected to independently verify every criterion and assumption. The member must, however, evaluate the source, assess whether the information is supported, determine whether the presentation meets Rule 2210’s general content standards, and consider the information available from the third party.
Existing content standards still apply
The amendment does not displace Rule 2210(d)(1)’s general content standards. Communications must remain fair and balanced and based on principles of fair dealing and good faith. They also must not omit material facts or qualifications or contain false, exaggerated, unwarranted, promissory, or misleading statements or claims. Members must continue to consider the audience receiving the communication.
Gaps Between the FINRA and SEC Marketing Rules Remain
Although the amendment brings FINRA Rule 2210 closer to the Marketing Rule in some respects, the two frameworks are not completely aligned.
FINRA’s exception covers only projections and targets, while the Marketing Rule covers other forms of hypothetical performance, such as backtested, model, related, or extracted performance.
FINRA also declined to treat Marketing Rule-compliant disclosures as automatically sufficient under Rule 2210. Dual registrants should recognize that recordkeeping obligations under Rule 2210 and Investment Advisers Act of 1940 Rule 204-2 do not completely overlap.
Practical Implications for Fund Sponsors, Advisers, and Distributors
Private fund marketing through placement agents
Once the amendment becomes effective, sponsors will be able to work with placement agents to include performance projections and targeted returns in pitchbooks, offering memorandum summaries, and other materials distributed by broker-dealers.
The placement agent’s audience controls, disclosure requirements, and source-documentation requirements still must be satisfied. Materials from which targets were previously removed solely because a FINRA member would distribute them may be candidates for revision.
Dual registrants and dually registered personnel
Firms with both an adviser and a broker-dealer may be able to leverage existing Marketing Rule infrastructure, including relevance procedures, hypothetical-performance disclosure libraries, and substantiation files.
A gap analysis nevertheless remains important. FINRA expressly declined to treat Marketing Rule-compliant disclosure as sufficient in all cases, and the new source-records obligation under Rule 2210(b)(4)(A)(iv) is distinct from the requirements of Advisers Act Rule 204-2.
Retail distribution channels
Distributors of registered funds, interval funds, nontraded real estate investment trusts (REITs), and nontraded business development companies (BDCs) will remain unable to use projections or targets in materials intended for mass retail distribution.
Track-record presentations
Broker-dealer communications using extracted, related, or model performance will remain restricted. Examples include the results of a single investment extracted from a fund, predecessor performance, or model portfolio performance.
An adviser may be able to use these forms of hypothetical performance under the Marketing Rule, but the new FINRA exception does not extend to them.
Increased diligence
Expect placement agents and distributors to request assumption schedules, model support, and source documentation before distributing materials containing projections or targets, and to apply a second layer of review to adviser-prepared marketing delivered through the broker-dealer channel.
No effective date yet
The amendment is not yet effective. FINRA will announce the effective date in a Regulatory Notice to be published no later than 60 days after SEC approval. The effective date will be no later than 180 days after publication of the notice.
Until then, firms should continue to comply with Rule 2210’s existing requirements and should not rely on the new exception. With further amendments and guidance possible, firms should build compliance programs that can adapt.
Alston & Bird’s Investment Funds Group will continue to monitor the amendment’s implementation and any additional guidance. The group can help clients assess the amendment’s impact on their marketing and distribution practices.
If you have any questions, or would like additional information, please contact one of the attorneys on our Investment Funds team.
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