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February 13, 2017 at 07:17 AM
The Financial Industry Regulatory Authority, as part of its retrospective review of its rules, is seeking comment on proposed amendments to FINRA Rule 2210 (Communications with the Public), which sets limits on predicting or projecting investment performance.
The proposed amendments would create an exception to the rule’s prohibition on projecting performance to permit a firm to distribute a customized hypothetical investment planning illustration that includes the projected performance of an asset allocation or other investment strategy, but not an individual security, subject to specified conditions, according to FINRA’s Regulatory Notice 17-06.
Comments are due by March 27.
The exception “would be available for all firms, including firms that operate only an online platform, and could be used with both current and prospective customers,” the notice states, and the illustration may “project an asset allocation or other investment strategy, but not the performance of an individual security.”
The proposal, FINRA states, “would require that there be a reasonable basis for all assumptions, conclusions and recommendations, and that the illustration clearly and prominently disclose the fact that the illustration is hypothetical and there is no assurance that any described investment performance or event will occur. All material assumptions and limitations applicable to the illustration would have to be disclosed.”
