FINRA Opens the Door to Projected Returns in Private Fund Marketing

On October 15, 2026, the SEC issued Exchange Act Release No. 34-106675 (“Release”), approving FINRA’s proposed rule change as modified by Amendment No. 1 to amend FINRA Rule 2210 to create a new exception to the prohibition on the use of projected performance and targeted returns (SR-FINRA-2026-004). The new exception represents a significant and transformative change in application of the prohibition, benefiting both member brokers and the private funds and other issuers they represent. The amendment replaces a blanket prohibition, with only a few minor and technical exceptions, with a policies-and-procedures approach permitting the use of projected performance information and targeted returns in an appropriate manner with sophisticated investors. While this approach opens up an attractive opportunity to brokers, it will also present a challenge to compliance professionals and their advisors in identifying and describing when the use of projected performance information is appropriate.

Rule 2210(d)(1)(F) Before the Amendment

FINRA Rule 2210 is the principal rule governing communications with the public by member firms. FINRA Rule 2210 defines terms including “retail communications,” “institutional communications,” and “correspondence” and sets forth requirements for, among other things, supervisory approval of communications, recordkeeping, and filing of certain communications with FINRA. Subsection (d) contains content standards for communications, and subsection (d)(1)(F) provides that “communications may not predict or project performance,” subject to exceptions for hypothetical illustration of mathematical principles, investment analysis tools, and price targets contained in a research report. The prohibition on projected performance applies to all communications, not merely retail communications.

Over the years, FINRA staff provided guidance in private and public meetings and FAQs on related topics, including whether an issuer’s private placement memorandum would be considered a broker communication and the difference between projections of returns to investors, which were not permitted, versus reasonable forecasts of issuer operating metrics, which were permitted.¹ The guidance often made a distinction between performance information in retail communications and the same information in institutional communications, although FINRA staff acknowledged that the rule itself does not distinguish between the two. FINRA staff also took the position that target returns could be viewed (or misused) as projected performance, even though target returns (which ideally describe the investment profile of assets to be acquired by the fund) have a different disclosure function than projected performance information.

Goodwin’s private fund clients, like private fund managers elsewhere, expressed frustration at the inability to use projected performance in, for example, broker slide decks, especially in offerings to institutional investors only. This was especially true for fund managers that used brokers or had broker affiliates when they saw that competitors who did not use brokers to sell their fund interests were not subject to the same prohibitions. In an effort to obtain more certainty around guidance in this area — and perhaps to carve out an exception for institutional investors and other sophisticated investors — in 2021, Goodwin invited prominent broker regulatory lawyers from other law firms to form an informal task force to present a case for amending FINRA Rule 2210 to permit the use of some projected performance information. FINRA was receptive to meeting with the task force, and, after some twists and turns,² the joint efforts of the task force and FINRA staff, together with comments from other interested parties, resulted in the current amendments. 

Elements of New Exception to Prohibition on Use of Projected Performance Information

The new exception is conditioned on satisfaction of the following three elements:

1. Written policies and procedures reasonably designed to ensure that the communication containing projected performance or targeted returns³ is relevant to the likely financial situation and investment objectives of the intended audience of the communication

According to the Release, “FINRA stated that, under such reasonably designed policies and procedures, a communication containing projected performance or targeted returns should only be distributed to investors whom a member reasonably believes have access to resources to independently analyze this information and who have the financial expertise to understand the risks and limitations of these types of presentations.”⁴ FINRA does not believe that the proposed rule change generally would permit the use of projected performance in communications for a mass audience or general circulation, including a general retail investor audience.⁵

The amended rule does not prescribe the ways in which a member firm may satisfy the policies and procedures requirement, although FINRA stated that a member firm could, for example, partly base its policies and procedures on its past experiences with particular types of investors who seek this information, group investors into categories or types, or restrict its intended audience to investors who have expressed interest or actually invested in particular types of securities.⁶ FINRA does not consider the fact that an investor has expressed an interest in high returns to support, by itself, a reasonable belief that projected performance information is relevant to the likely financial situation and investment objectives of the investor.⁷

In addition, an earlier version of the amendment would have required a member communicating projected performance to have a reasonable basis for the criteria used and assumptions made in calculating the projected performance. That requirement was later removed, on the basis that FINRA Rule 2210’s existing general content standards already preclude the communication of unreasonable projected performance information. The SEC emphasized that the general content standards, together with the recordkeeping requirement, effectively require members to substantiate the basis for projected performance and targeted returns before communicating them to investors, including maintaining records supporting the underlying criteria and assumptions.

2. Disclosure of information sufficient to enable the intended audience to understand (i) the criteria used and assumptions made in calculating the projected performance and (ii) the risks and limitations of using the projected performance in making investment decisions

FINRA does not prescribe the methodology for calculating projected performance under the first prong of the disclosure requirement. Instead, member firms are expected to provide a general description of the methodology used sufficient to enable the intended audience to understand the basis for the methodology as well as the assumptions underlying the projections. The second prong is intended to help ensure that investors do not unreasonably rely on projected performance information given the uncertainty and risk attendant to it. 

An earlier version of the amendment would have required the member to include in its first prong disclosure whether its calculation of projected performance was net of anticipated fees and expenses and, in its second prong, disclosure of reasons why the projected performance might differ from actual performance; however, those provisions were removed on the basis that the remaining requirements of the disclosure standard, as well as the general content standards in FINRA Rule 2210(d), were sufficient to ensure that investors receive the information necessary to consider the risks and limitations of the projected performance information.⁸

3. Records required to be kept pursuant to FINRA Rule 2210(b)(4)(A)(iv) include information concerning the source of any projected performance or targeted return

FINRA has stated that the proposed recordkeeping requirement would be consistent with the other types of records currently required to be maintained pursuant to FINRA Rule 2210(b)(4) and would help regulators to evaluate members’ compliance with the terms of the proposed rule change.⁹

The new flexibility also creates potential compliance traps. An investor’s accredited investor or qualified purchaser status does not, by itself, establish that a projection is appropriate for that investor, and a presentation prepared in compliance with the investment adviser Marketing Rule does not automatically satisfy FINRA’s requirements when used by a placement agent. Nor does removal of the express reasonable basis and certain disclosure provisions eliminate the need to substantiate projections and explain their assumptions, treatment of fees, and material limitations. Fund managers and member firms should assess not only the content of a presentation but also its intended audience and the basis for their audience determinations, distribution controls, and supporting records before relying on the exception.

Investment Adviser Considerations

For private fund managers that are registered investment advisers, the new exception does not operate in isolation. Under the Marketing Rule (Rule 206(4)-1 under the Advisers Act), projected performance and targeted returns are “hypothetical performance” and an adviser may include them in an advertisement only if it (i) adopts and implements policies and procedures reasonably designed to ensure that the hypothetical performance is relevant to the likely financial situation and investment objectives of the intended audience, (ii) provides sufficient information to enable the intended audience to understand the criteria used and assumptions made in the calculations, and (iii) provides, or offers to provide promptly, sufficient information to understand its risks and limitations. FINRA’s exception was modeled closely on these conditions, which should allow advisers and their placement agents to coordinate audience determinations, disclosure, and supporting records. However, the two regimes are not interchangeable. A placement agent’s presentation will often be treated as the adviser’s own advertisement where the adviser participated in preparing, reviewing, or approving it, so both sets of requirements may apply to the same document. In that case, the adviser remains subject to the Marketing Rule’s general prohibitions, its requirements with respect to net/gross presentations, its narrow one-on-one exception for hypothetical performance, and its books-and-records requirements, even where FINRA’s final rule dropped comparable provisions. Advisers should therefore confirm that broker materials containing projections satisfy the Marketing Rule independently and not rely on a placement agent’s compliance with Rule 2210 as a substitute.

Next Steps

FINRA is expected, consistent with its usual practice, to issue a regulatory notice discussing the rule change and stating an effective date for the amendment. Given that the rule change is permissive in nature, FINRA should not need to set an effective date too far in the future or a separate implementation date. 

Placement agents and other member firms wishing to begin using projected performance may start immediately drafting and implementing policies and procedures identifying the circumstances under which projected performance information can be provided to investors and the types of investors for whom it is appropriate. At the same time, managers of private funds that engage placement agents, including affiliated brokers, should open communications with their placement agents about the expanded use of projected performance information in communications with prospective institutional and other financially sophisticated investors.

Goodwin can help fund managers and placement agents assess which existing presentations may qualify for the new exception, identify eligible investor audiences, and develop the policies, disclosure, and supporting records needed to use projected performance and targeted returns.