SEC Stays FINRA’s Amendments to Advertising Rule

On July 19th, the SEC’s Division of Trading and Markets approved, by delegated authority, amendments to FINRA’s advertising rule (Rule 2210) that would permit projected performance and targeted returns in limited circumstances. In a highly unusual move, one of the Democratic Commissioners stayed the Division’s order.

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Therefore, as of today, FINRA’s amendments have not taken effect. The IPA will keep you updated as developments occur.

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You may recall that in December, the IPA filed a comment letter strongly supporting the proposed rule change.

The amendments would permit performance projections and targeted returns concerning a security, asset allocation, or other investment strategy in (1) institutional communications or (2) communications either to (A) qualified purchasers when the communication promotes or recommends a broker-dealer’s unregistered securities or (B) qualified purchasers or “knowledgeable employees” under Investment Company Act Rule 3c-5 when the communication promotes or recommends a private placement sold only to QPs or knowledgeable employees.

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The amendments would impose conditions to help ensure that the projections have a reasonable basis, are accompanied by certain disclosures, and the broker-dealer has written policies and procedures reasonably designed to ensure that the communication is relevant to the likely financial situation and investment objectives of the audience.

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