FINRA Proposes to Permit Performance Projections and Targeted Returns: Proposal Would Help Level the BD/RIA Playing Field

In February 2026, the Financial Industry Regulatory Authority (FINRA) proposed amendments to its Rule 2210(d)(1)(F) that would permit member firms to include performance projections and targeted returns in communications to investors. Member firms, however, would be subject to three conditions designed to ensure the projections have a sound basis.

Existing Prohibition and Exceptions

Currently, the rule prohibits communications that “predict or project performance, imply that past performance will recur or make any exaggerated or unwarranted claim, opinion or forecast,” with exceptions for:

A hypothetical illustration of mathematical principles that do not predict or project the
performance of an investment or investment strategy (e.g., calculators that compute savings over an assumed time period with assumed variables of rates of return, frequency of compounding, and tax rates);

An investment analysis tool, or written reports produced by such a tool, that meet the requirements of FINRA Rule 2214 (“Requirements for the Use of Investment Analysis Tools”) (e.g., interactive technological tools that produce simulations and statistical analyses that present the likelihood of various investment outcomes of certain investments or investment strategies); and

A price target in a research report on debt or equity securities, provided the price target has a reasonable basis, the report discloses the valuation methods used to determine the price target, and the price target is accompanied by disclosure concerning the risks that may impede achievement of the target.

Proposed New Exception

The proposed amendments would create a new “narrowly tailored” exception to Rule 2210(d)(1)(F) that would allow member firms to disseminate communications that “project the performance or provide a targeted return with respect to a security, a securities portfolio, or an asset allocation or other investment strategy.” The new exception would be subject to compliance with the following three conditions:

1. The member firm must adopt and implement written policies and procedures that are “reasonably designed to ensure that the communication is relevant to the likely financial situation and investment objectives of the intended audience of the communication.” Member firms would have the flexibility to develop policies and procedures that “best suit their investor base and the business in which they engage.” FINRA suggested, for example, that a firm could adopt and implement written policies “based in part on the member’s past experiences with particular types of investors who seek this information.” As a practical matter, FINRA expects the proposed amendments to affect primarily communications to institutional and other sophisticated investors.

2. The member firm must have a reasonable basis “for the criteria used and assumptions made in calculating the projected performance or targeted return.” The member firm also must retain written records that support the basis for such criteria and assumptions, as well as maintain a supervisory system to achieve compliance with the reasonable basis requirement. As with condition 1 above, the rule would not prescribe the method by which a member firm forms a reasonable basis. Rather, the factors that member firms would consider in forming a reasonable basis would depend on the facts and circumstances.

Non-exclusive examples of factors provided by FINRA include consideration of:

• Global, regional, and country macroeconomic conditions;
• In the case of a single security issued by an operating company, the issuing company’s operating and financial history;
• The industry’s and sector’s current conditions and the stage of the business cycle;
• The quality of the assets included in a securitization; and
• The appropriateness of selected peer-group comparisons.

These examples overlap, though not entirely, with the factors that FINRA set out in the supplementary material accompanying its November 2023 rule change proposal to permit the use of projected performance and targeted returns. That proposal was stayed by the SEC, and the supplementary materials are not part of the current proposed amendments. Nevertheless, FINRA stated that member firms “would be free to consider [the factors in the supplementary material], as well as other factors, when making their reasonable basis determinations” under its proposed rule change proposal.

3. The member firm must provide sufficient information to enable the intended audience to
understand:

• The criteria used and assumptions made in calculating the projected performance or targeted return, including whether the projected performance or targeted return is net of anticipated fees and expenses; and
• The risks and limitations of using the projected performance or targeted return in making investment decisions, including reasons why the projected performance or targeted return might differ from actual performance.

According to FINRA, the first such disclosure requirement “is not intended to prescribe any particular methodology or calculation of such performance.” In addition, FINRA does not “expect a firm to disclose proprietary or confidential information regarding the firm’s methodology and criteria.” Rather, FINRA expects member firms “to provide a general description of the methodology used sufficient to enable the investors to understand the basis of the methodology, as well as the assumptions underlying the projection or targeted return.”

Reason for the Proposed Amendments According to FINRA, the purpose of the proposed amendments is to “better align the regulatory requirements for broker-dealers” with those of investment advisers, which have greater flexibility to use performance projections and other types of performance under Rule 206(4)-1 (Adviser Marketing Rule) under the Investment Advisers Act of 1940.

The proposed amendments reflect FINRA’s determination that aligning Rule 2210 with the Adviser Marketing Rule provisions concerning hypothetical performance will “help investors, including by reducing investor confusion and enabling them to receive additional information when making investment decisions, and increase regulatory harmonization while maintaining investor protection safeguards.” Such investor confusion currently may arise when investors receive different information about the same investments from different types of financial professionals.

Differences From Adviser Marketing Rule Conditions

FINRA anticipates interpreting the requirements in the proposed amendments that align with similar requirements in the Adviser Marketing Rule consistently with how the SEC has interpreted those Adviser Marketing Rule requirements. That said, the conditions of the proposed amendments do not entirely align with those of the Adviser Marketing Rule.

According to FINRA, the scope of the performance types covered by the proposed amendments (projected performance and targeted returns) is intentionally narrower than that of the Adviser Marketing Rule (hypothetical performance, including performance derived from model portfolios; backtested performance; and targeted or projected performance returns with respect to any portfolio or to the advisory services with regard to the securities offered). The proposed amendments also impose a reasonable basis requirement (outlined above), whereas the Adviser Marketing Rule does not, though it does require adviser advertising to be fair and balanced and to meet other hypothetical performance requirements. Finally, the proposed amendments require disclosure of the reasons why the projected performance or targeted return might differ from actual performance, whereas the Adviser Marketing Rule requires an investment adviser “to provide sufficient information to enable the intended audience to understand the criteria used and assumptions made in calculating the hypothetical performance,” as well as “the risks and limitations of using such hypothetical performance in making investment decisions.”

Nevertheless, both the SEC and FINRA have in mind that projected performance may be useful to investors in making an informed investment decision, which arguably would contribute to their financial wellness.