The Financial Industry Regulatory Authority, Inc. (FINRA), the body that regulates broker-dealer communications, is proposing rules that would permit brokers to offer a form of financial forecasting known as performance projections and targets. This move signifies a notable shift in FINRA’s historical stance, which has traditionally been to prohibit such communication methods, albeit with negligible exceptions.
Conversely, the U.S. Securities and Exchange Commission (SEC), the authority responsible for regulating investment adviser advertisements, has generally allowed the use of performance projections and targets. Thus, these proposed regulatory changes by FINRA suggest a significant convergence between the policies of FINRA and the SEC.
An analyzation of the new rules indicates that they appear to be aimed at resolving the ongoing disparities between the FINRA and SEC policies regarding projections. If implemented, these changes should provide broker-dealers with more latitude to provide performance projections and targets, bringing their methods more in line with those utilized by investment advisers under the SEC’s jurisdiction.
For a more detailed understanding of the proposed legislative changes, interested readers may visit the comprehensive article put together by K&L Gates LLP here.
However, these proposed changes should not be taken lightly and experienced legal professionals will surely take time to thoroughly review the newly proposed changes and their potential implications. As such, it is advisable for individuals and organizations in the industry to consult with their legal team or consultants to better understand how these changes could affect their operations and practices.
As of now, it remains to be seen how the industry will react to these potential regulatory shifts by FINRA. Going forward, these proposed changes could significantly redefine boundaries in the broker-dealer industry, but it would be premature to speculate at this juncture.