The board of governors of the Financial Industry Regulatory Authority, Inc. (FINRA) approved a proposed amendment to FINRA Rule 2210 that would allow FINRA members to communicate performance projections to investors under certain conditions. Currently, FINRA Rule 2210 prohibits communications from predicting or projecting performance, from implying that past performance will recur, or from making any exaggerated or unwarranted claim, opinion or forecast. Under the proposed amendment, FINRA members may communicate projections if they adopt comprehensive policies and procedures related to the projections, have a reasonable basis for the criteria and assumptions used in calculating the projections and provide certain specified information alongside the projections.
The Securities and Exchange Commission (SEC) must approve the rule amendment before it becomes effective, and just last year, the SEC stayed the approval of a similar proposed amendment to FINRA Rule 2210 that would have allowed FINRA members to communicate performance projections to institutional investors and qualified purchasers. The prior amendment had been approved by the SEC’s Division of Trading and Markets on July 19, 2024, and the SEC stayed such approval just one week later, on July 26, 2024. The reasons for the SEC’s stay of the approval of the prior amendment are unclear, and it remains to be seen whether the SEC will approve this newly proposed amendment to FINRA Rule 2210.
