Broker-dealers await a decision from the SEC which could open up what they are allowed to show to investors.
Some background history…
In February FINRA proposed a rule change to the US regulator, attempting to overturn something that registered broker-dealers have been barred from doing since FINRA’s Rule 2210 (governing public-facing communications) was written in 2013: to show prospects performance projections and targeted returns.
The SEC’s comment window then closed in March, and FINRA consented to a review extension the month later. We now sit in Q3 awaiting a decision. It is, however, a live rule that could be moved out again without hesitation.
Timing aside, it’s what inside that counts! Today a registered investment advisor can show a targeted Internal Rate of Return (IRR) or ‘modelled’ return situation to an institutional investor under the SEC Marketing Rule. But a broker-dealer is legally stopped from distributing that same fund through a placement agent with any projection considered an “exaggerated or unwanted claim.”
This ‘rule for one, not the other’ idea has caused confusion for fund sponsors and LPs alike. The former will have maintained different versions of pitch decks depending on the delivery channel they use, meaning end investors may see more clarity from any one intermediary compared to the next.
So long as broker-dealers have a well documented and reasonable basis for their fund assumptions, written policies that restrict distribution to appropriately sophisticated audiences, and clear disclosures that projections may be different from actual results, this proposal could clear up these distinct existing hurdles.
So, what does this mean for a fund marketer?
Simply, it’s the right time still to get ahead of this shift before any approvals take place. After all, funds are commonly distributed partly through placement agents or broker-dealers by hedge funds and private credit businesses, and can be done accordingly:
- Draft (but do not distribute) a projections or targeted returns policy, similar to what’s used by compliance teams under the adviser-side SEC Marketing Rule.
- Make it clear to placement agents that aligned materials may become usable, especially once a decision date is cleared.
Performance assumptions, documentation, and disclosure language all come under one banner. Readying each component for the potential rule-change will see proactive firms appeal to allocators with great pitch decks first, leaving unprepared funds chasing.
Source
Ropes & Gray, “FINRA Proposes Rule Change to Permit Projections of Performance and Targeted Returns in Member Communications”
SEC, SR-FINRA-2026-004 filing
