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FINRA Acts to Update its Advertising Rule

The Financial Industry Regulatory Authority filed a proposed rule change with the Securities and Exchange Commission on November 13, 2023, to amend FINRA Rule 2210. This amendment would allow a broker-dealer to project performance or provide a targeted return with respect to a security, asset allocation or other investment strategy in a communication distributed solely to qualified purchasers.   

FINRA's current prohibition against performance projections is intended to protect investors who may lack the capacity to understand the risks of projected performance in making investment decisions but allows certain tools, such as hypothetical illustrations or price targets with valuation methods.

FINRA's current proposal aims to broaden the member firm's ability to provide projected information to institutional investors and qualified purchasers and comports with the SEC's Investment Advisor Marketing rule. 

FINRA appreciates that "projected performance may be useful for institutional investors and [qualified purchasers] that either have the financial expertise to evaluate investments and to understand the assumptions and limitations associated with such projections, or that have resources that provide them with access to financial professionals who possess this expertise."


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