IAA Files Comment Letter to the SEC on FINRA’s Proposed Amendments to Rule 2210
March 17, 2026
Vanessa A. Countryman
Secretary
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-1090
Re: Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change to Amend FINRA Rule 2210 (Communications with the Public) [Release No. 34-104877; File No. SR-FINRA-2026-004]
Dear Ms. Countryman:
The Investment Adviser Association (IAA)[1] appreciates the opportunity to comment on proposed amendments submitted by the Financial Industry Regulatory Authority (FINRA) to FINRA Rule 2210 (Proposal).[2] The Proposal is intended to bring Rule 2210 into closer alignment with the standards governing hypothetical performance adopted by the Securities and Exchange Commission (Commission) in Rule 206(4)-1 (Marketing Rule) under the Investment Advisers Act of 1940 (Advisers Act).[3] The IAA strongly supports FINRA’s efforts to conform Rule 2210 with the Commission’s Marketing Rule, and welcomes the Proposal as an important step toward ensuring investors receive consistent and meaningful information in performance-related communications.[4]
At the same time, we believe FINRA could further advance these objectives by more fully aligning Rule 2210 with the Marketing Rule. Accordingly, while the IAA supports the Proposal, we encourage FINRA to:
- Extend the Proposal to encompass all forms of hypothetical performance permitted under the Marketing Rule, including model performance and backtested performance (e., performance derived from the application of a strategy to historical data from periods during which the strategy was not actually implemented);
- At a minimum, permit FINRA members to present hypothetical performance derived from actual investment returns; and
- Issue guidance to clarify its prior positions regarding internal rates of return (IRR) if the Proposal is adopted, as discussed below.
Our specific comments and recommendations are set forth below.
I. The IAA Supports Alignment with the Marketing Rule
The IAA applauds FINRA’s efforts to bring Rule 2210 into closer alignment with the Marketing Rule. Greater alignment will reduce investor confusion,[5] maintain appropriate investor protection safeguards, streamline the sharing of performance information by financial market participants, and reduce compliance costs for affected firms by allowing such firms to leverage existing compliance infrastructure developed to satisfy the Marketing Rule.[6]
Current Rule 2210 requires FINRA members to withhold certain information from investors, even where they have determined that the information is relevant to the likely financial situation and investment objectives of the investor and the same information may be provided by investment advisers directly. The alignment of regulatory standards for investor-facing communications would thus be a welcome change for investors as well as investment advisers that are dually registered or rely on FINRA members acting as distributors and placement agents. The Proposal would meaningfully improve FINRA members’ ability to share performance-related information with investors, subject to appropriate controls and conditions.
The IAA especially supports FINRA’s decision to replace the prescriptive investor thresholds proposed in 2023 with the Marketing Rule’s principles-based approach, which focuses on whether a particular communication is relevant to the likely financial situation and investment objectives of the intended audience. The Proposal prudently allows FINRA members to determine the appropriate universe of recipients for targets and projected performance in accordance with their written supervisory procedures and reasonable assessment of investor sophistication.
We also support the adoption of a disclosure framework that is generally aligned with the Marketing Rule. This alignment will improve efficiency, particularly when disclosures are prepared in the first instance by investment advisers subject to the Marketing Rule and facilitate fair and consistent communications to investors without regard to the regulatory status of the party responsible for the communication.
II. The Scope of the Proposal Should Be Fully Aligned with the Marketing Rule
Although the IAA supports the Proposal, we encourage FINRA to consider whether its stated goals of “aligning regulatory approaches across different market segments and creating more consistent standards” through the FINRA Forward initiative are met where a fundamental gap remains between the Proposal and the Marketing Rule.[7]
FINRA has identified several policy goals underlying the Proposal, including limiting opportunities for regulatory arbitrage, “level[ing] the regulatory playing field” between investment advisers and broker-dealers, and reducing compliance burdens for dual registrants that must reconcile divergent regulatory standards. These goals would be more fully realized through full alignment with the Marketing Rule. By excluding model performance and backtested performance, forms of hypothetical performance expressly permitted under the Marketing Rule, the Proposal unfortunately preserves a meaningful regulatory divergence and limits the extent to which these policy objectives can be achieved.
By limiting the types of hypothetical performance FINRA members may present to a subset of those allowed by the Marketing Rule, FINRA would effectively substitute its own judgment for that of the Commission. The Commission’s framework governing hypothetical performance, defined to include model performance and backtested performance, was developed through an extensive rulemaking process and reflects careful consideration of the risks and benefits associated with such performance presentations. In adopting the Marketing Rule, the Commission recognized that hypothetical performance can provide meaningful and useful information to investors, particularly where it is accompanied by appropriate safeguards designed to ensure that the information is relevant to the intended audience and presented in a fair and balanced manner.[8]
The Commission therefore adopted a principles-based framework permitting hypothetical performance subject to conditions designed to mitigate the risk of investor misunderstanding, including requirements that advisers adopt policies and procedures reasonably designed to ensure the relevance of hypothetical performance to the intended audience and provide sufficient information to enable investors to understand the criteria, assumptions, risks, and limitations associated with the performance.[9]
The IAA does not believe there is a policy rationale sufficient to justify departing from the Commission’s well-considered framework by excluding model performance and backtested performance from Rule 2210. Moreover, the conditions set out in the Proposal for FINRA members disseminating targets and projections (requirements regarding a reasonable basis for assumptions, supervisory procedures governing the use of such performance, and the obligation to present communications that are fair and balanced) were considered by the Commission to be suitable investor protections for all forms of hypothetical performance. These safeguards should likewise be adopted by FINRA to address all forms of hypothetical performance permitted under the Marketing Rule.
Maintaining divergent regulatory standards for broker-dealers and investment advisers with respect to the presentation of hypothetical performance would perpetuate the operational and compliance challenges that the Proposal (and the broader FINRA Forward initiative) are meant to alleviate. Many financial institutions operate both broker-dealers and investment advisers or distribute the same investment strategies through funds and advisory engagements. Where advisers may present model performance or backtested performance under the Marketing Rule but broker-dealers may not, advisers that engage broker-dealers to distribute their funds must maintain separate marketing frameworks and tailor communications based solely on the regulatory status of the distributor rather than the substance of the information presented. This fragmentation increases compliance costs, creates operational inefficiencies, and raises the risk of inadvertent regulatory violations without providing meaningful additional investor protection.[10]
The Proposal also risks disadvantaging certain market participants and limiting the information available to investors about a prospective investment. For example, smaller fund sponsors frequently rely on broker-dealer distribution channels to bring new products to market. Because new strategies often lack a live performance history, model performance or backtested performance may be the only way to illustrate how a new strategy would have performed under historical market conditions given a certain set of assumptions. Model performance and backtested performance are also key analytical tools used to explain investment methodologies and model changes. Prohibiting broker-dealers from presenting this information places those smaller fund sponsors at a meaningful disadvantage relative to sponsors that do not need to rely on broker-dealers to distribute their funds and can present hypothetical performance under the Marketing Rule.
This lack of alignment also directly affects clients of dual registrants by resulting in uneven access to information about the same investment strategies. Advisory clients and fund investors evaluating identical funds or strategies offered by the same firm may receive different levels of detail regarding potential outcomes, risks, and assumptions solely because the communication is delivered in a broker-dealer rather than an advisory capacity. This disparity can limit an investor’s ability to fully understand and compare investment options, potentially leading to less informed decision making that is driven by regulatory distinctions rather than the investor’s financial objectives or sophistication. Dual registrants also face significant challenges maintaining separate hypothetical performance standards for the same investment strategy based solely on whether a communication is delivered in an advisory or broker-dealer capacity, particularly where the same personnel, compliance infrastructure, and supervisory systems are used across business lines.
As FINRA itself recognized in the Proposal, alignment of marketing standards is important to ensure that investors do not receive materially different information about the same investment depending on the channel through which it is offered.[11]
Finally, hypothetical model or backtested performance are frequently requested and relied upon by sophisticated and institutional investors when evaluating new strategies or assessing a manager’s investment approach. The Commission acknowledged this reality in adopting the Marketing Rule, noting that such hypothetical performance may be particularly relevant for sophisticated investors who are capable of evaluating the assumptions and limitations underlying such performance.[12] Subject to appropriate safeguards, hypothetical performance enhances transparency and provides investors with access to information that is already widely used in investment decision-making.
In the event that FINRA elects not to fully align the Proposal with the Marketing Rule’s definition of hypothetical performance, the IAA respectfully requests that, at a minimum, FINRA permit FINRA member firms to present forms of hypothetical performance that are developed based on an adviser’s actual returns. For example, investment advisers often market new strategies or funds using extracts from composites (i.e., carve outs),[13] composites of extracts, or track records developed based on the aggregation of actual positions across various accounts and/or funds. Although these forms of performance presentation may be treated as hypothetical performance under the Marketing Rule, they are derived from real investment decisions and outcomes, and do not present a meaningful risk of investor misunderstanding if subject to the same controls and conditions that FINRA proposes to apply to targets and projections. In practice, this type of performance is frequently expected or requested by sophisticated investors and is often removed from materials disseminated by FINRA member placement agents (to the detriment of investors who would benefit from additional context regarding a manager’s relevant investment history). We therefore strongly believe that (i) permitting this information is in the best interests of investors and (ii) the conditions in the Proposal sufficiently safeguard against any risks introduced by the performance.
III. The Proposal Should Address Uncertainties Regarding the Treatment of Internal Rate of Return
In 2020, FINRA issued guidance to its members regarding certain marketing practices in connection with private offerings, including the presentation of IRR in communications with the public.[14] In this guidance, FINRA explicitly stated that IRRs of investment programs that have no operations or that operate as a blind pool would be considered prohibited projections under Rule 2210. The guidance also provided that the IRRs of investment programs with a combination of realized and unrealized holdings would comply with Rule 2210 only if calculated in a manner consistent with GIPS. Subsequent FINRA FAQs issued in 2021 also characterized unrealized positions as projections with no “actual” performance and placed limits on the ability of FINRA members to present the IRRs of certain individual holdings and subsets of holdings. One of these FAQs expressly states that presenting the IRR of a single unrealized holding constitutes a prohibited projection.[15] The Marketing Rule imposes no similar conditions on the calculation or presentation of IRR and does not treat the performance of actual positions and portfolios as hypothetical performance, even when the actual positions are unrealized.
FINRA’s prior guidance on the calculation and presentation of IRR is not addressed in the Proposal. Specifically, the Proposal does not address how IRR will be treated under the proposed exception for presenting targeted returns and projections of performance and does not clarify whether the positions expressed in Regulatory Notice 20-21 and the 2021 FAQs remain applicable under the proposed framework. Given that FINRA’s existing position on the calculation of IRR is inconsistent with the Marketing Rule and is based, at least in part, on the position that IRRs represent performance projections under Rule 2210(d)(1)(F), we encourage FINRA to address these interpretive questions in the final rule or in accompanying guidance.
If, as noted above, FINRA seeks to align regulatory approaches for investor-facing communications across different market segments, it should clarify that the IRR for actual investments or investment programs – even when based in whole or in part on IRRs of unrealized positions – is not a projection of performance. The performance of assets that have been purchased and can be valued constitutes actual performance under both the Marketing Rule and GIPS. This is as true for private assets with fair values as it is for liquid assets with market values, and FINRA should align its guidance on this issue with the Marketing Rule and other industry standards.
* * *
We appreciate your consideration of our comments on the Proposal and would be happy to provide any additional information that may be helpful. The IAA is also happy to engage with FINRA on other aspects of Rule 2210 and interpretive guidance that could be more closely aligned with the Marketing Rule in any future rulemaking. Please do not hesitate to contact the undersigned if we can be of further assistance.
Respectfully,
Gail C. Bernstein
General Counsel and Head of Public Policy
Sanjay Lamba
Associate General Counsel
cc:
The Honorable Paul S. Atkins, Chairman
The Honorable Hester M. Peirce, Commissioner
The Honorable Mark T. Uyeda, Commissioner
Jamie Selway, Director, Division of Trading and Markets
Brian Daly, Director, Division of Investment Management
[1] The IAA is the leading organization dedicated to advancing the interests of fiduciary investment advisers. For more than 85 years, the IAA has been advocating for advisers before Congress and U.S. and global regulators, promoting best practices and providing education and resources to empower advisers to effectively serve their clients, the capital markets, and the U.S. economy. Our members range from global asset managers to the medium- and small-sized firms that make up the majority of our industry. Together, the IAA’s member firms manage more than $57 trillion in assets for a wide variety of individual and institutional clients, including pension plans, trusts, mutual funds, private funds, endowments, foundations, and corporations. For more information, please visit www.investmentadviser.org.
[2] 91 Fed. Reg. 9308 (Feb. 25, 2026) (Proposing Release).
[3] 17 CFR §275.206(4)-1.
[4] The IAA has a strong interest in the Proposal because FINRA Rule 2210 directly affects how investment advisers communicate performance-related information when those communications are distributed through broker-dealer intermediaries. Investment advisers frequently rely on FINRA member firms to act as placement agents or distributors for funds, and many firms are dually registered as or operate affiliated broker-dealers and investment advisers. As a result, differences between Rule 2210 and the Marketing Rule can affect advisers’ communications with investors and create operational complexity for firms subject to both regulatory regimes.
[5] As FINRA notes, the “proposed rule change would reduce confusion for investors who currently may receive differing information depending on the regulated nature of their intermediary (such as RIAs) or are prohibited from receiving information that could be useful to their investment decision-making process.” Proposing Release at 9314.
[6] Proposing Release at 9310.
[7] FINRA Forward: Modernizing Oversight, https://www.finra.org/about/finra-forward/modernizing-oversight.
[8] Investment Adviser Marketing, Advisers Act Release No. 5653 (Dec. 22, 2020), at 210–220.
[9] Id. at 222–230 (describing conditions for the use of hypothetical performance under Rule 206(4)-1(d)(1)).
[10] These challenges are significant in practice. FINRA estimates that approximately 410 member firms are dually registered as broker-dealers and investment advisers, with approximately 416,000 registered representatives, of whom approximately 247,000 are dually registered as both broker-dealer and investment adviser representatives. The large number of dual registrants underscores the importance of aligning regulatory standards governing communications with investors.
[11] Proposing Release at 9309.
[12] Advisers Act Release No. 5653 (Dec. 22, 2020), at 214–216.
[13] Although viewed as hypothetical performance under the Marketing Rule, carve outs are treated as actual performance under the Global Investment Performance Standards (GIPS®).
[14] FINRA Regulatory Notice 20-21 (July 2020), https://www.finra.org/rules-guidance/notices/20-21.
[15] FINRA Frequently Asked Questions About Advertising Regulation, D.6.2 (Sept. 30, 2021), https://www.finra.org/rules-guidance/guidance/faqs/advertising-regulation#d6 (“Unrealized holdings have no actual performance experience, and any return metric would require its valuation to be estimated. Such metrics would represent a prohibited projection under FINRA Rule 2210(d)(1)(F).”).