The SEC Approved FINRA's Projected Returns Exception on 15 October: What Fund Managers Using Placement Agents Should Check

On 15 October 2026 the SEC approved an amendment to FINRA Rule 2210 that lets broker-dealers include projected performance and targeted returns in communications with investors, under conditions. The order is Release No. 34-106675, on file SR-FINRA-2026-004, and FINRA had first filed the proposal in February 2026 before modifying it with Partial Amendment No. 1. If you are a private fund manager, the change matters because a placement agent or any other broker-dealer that handles your materials has until now worked under a stricter standard than you do. The amendment is not yet in effect, so this is a preparation note, not a go-ahead.

What the rule now allows

The amendment adds a fourth exception to the general ban on projections in Rule 2210(d)(1)(F). Broker-dealers may include projected performance or targeted returns for a security, a portfolio, or an asset allocation or other investment strategy, if they meet three conditions. The first is audience: written policies and procedures must be reasonably designed to ensure that a communication is relevant to the likely financial situation and investment objectives of the people who receive it, and distribution should be limited to investors the firm reasonably believes have the resources and expertise to understand the risks. Mass or general retail communications are generally not allowed under that test. The second is disclosure: the audience must get enough information to understand the criteria and assumptions behind the figure and its risks and limitations. The third is records: the firm must keep records of the source of any projection or target under new Rule 2210(b)(4)(A)(iv).

What was dropped, and what was not

FINRA removed two things from its February proposal: a standalone reasonable-basis requirement, and express disclosures about whether figures are net of fees and why actual results may differ. The SEC order says members will generally still need to make those disclosures, tailored to the facts and the audience, so do not treat the removal as relief. The exception also does not cover backtested, model, related or extracted performance, and the order is silent on an effective date. FINRA is expected to announce it in a Regulatory Notice.

Why it matters to a fund manager

Under the SEC Marketing Rule (Advisers Act Rule 206(4)-1), an adviser can present hypothetical performance to an audience for whom it is relevant, with disclosure of criteria, assumptions, risks and limitations. A broker-dealer distributing your pitch deck or private placement memorandum had to run the same content through FINRA's tighter standard, so a manager could need a separate version of a deck, or have to remove a target return, for the broker-dealer channel. The amendment narrows that gap. It does not close it: the Marketing Rule's treatment of other forms of hypothetical performance, and the FINRA exception's list of exclusions, still differ. A document that passes the Marketing Rule does not automatically pass Rule 2210.

What to check

This section is our suggestion, not regulator guidance. First, do not rely on the exception until FINRA announces the effective date; the order does not give one. Second, list every figure in your materials that looks forward: a target net IRR, a target multiple, a pro forma yield, a capital deployment schedule. Mark which of them you currently remove for a broker-dealer version. Third, ask your placement agent how it plans to apply the audience test, and which of your investors it would treat as sophisticated, because FINRA did not define that standard and each firm will set its own. Fourth, build a supporting file for each projection: the criteria, the assumptions, the downside cases and the source of each number, since the agent will have to keep records of the source and will likely ask you for the file. Fifth, check the disclosure language alongside the figure; the order points to net-of-fee treatment and reasons results may differ as items a member will generally need to address. Sixth, if the same deck also goes to investors through your own team, review it under the Marketing Rule as well, because the two standards will apply side by side.

The documents it touches

Three documents are the likeliest to change: the pitch deck, the private placement memorandum, and the due diligence materials you send to a prospective LP. Our guide to the LP diligence pack lists the documents a diligent investor will ask for; add a projections section only after the effective date is known. If a placement agent is involved, agree who owns the review of forward-looking statements before the first draft goes out.

The wider exam context

We covered the private fund areas the SEC named for review in our note on the fiscal 2027 exam priorities published on 23 October. A clean file on projections is part of the same preparation, and is our suggestion rather than a stated exam requirement.

What to watch next

Watch for FINRA's Regulatory Notice with the effective date and any guidance on how firms should treat sophistication and disclosure. FundLinx members can see which institutions are active in your strategy.

This article is a general summary and is not legal advice; speak to qualified counsel before changing your marketing materials.

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