June 17, 2019

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FINRA Issues Interpretive Letter Regarding Related Performance Information in Institutional Communications

On June 12, staff of the Financial Industry Regulatory Authority published an interpretive letter (Letter) regarding the inclusion of certain related performance information in a FINRA member firm’s “institutional communications” (as such term is defined in FINRA Rule 2210 (Communications with the Public)) regarding a continuously offered closed-end fund. Rule 2210 subjects institutional communications to certain supervisory and content standards (e.g., institutional communications must be fair and balanced and may not include false, exaggerated or misleading statements).

Citing past interpretive letters, FINRA noted that communications provided solely to institutional investors do not raise the same investor protection concerns as sales materials shared with retail investors. The Letter concluded that the use of actual performance of separate or private accounts or funds that have (1) substantially similar investment policies, objectives and strategies; and (2) are currently managed or were previously managed by the same adviser or sub-adviser that manages the fund in question, would be consistent with the standards set forth in FINRA Rule 2210(d) under the circumstances and subject to the conditions set forth in the Letter. FINRA reiterated that the inclusion of related performance information, other than performance of a predecessor private account or fund, in a retail communication would not comply with Rule 2210(d).

The Letter is available here.

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About this Author

Janet M. Angstadt, Securities, Financial Services, Chicago, Lawyer, Katten Law FIrm

Janet M. Angstadt is the head of Katten's Chicago Financial Services practice. She focuses her practice on broker-dealer and exchange compliance issues and advises companies on matters regarding compliance with the regulations of the US Securities and Exchange Commission (SEC) and self-regulatory organizations (SROs).

Janet represents clients in a wide range of legal and regulatory matters, including mergers and acquisitions, SRO investigations, compliance issues related to registrations, sales practice, short sales, Regulation NMS, market-making and...

Stanley V. Polit, Katten Muchin, Financial Services lawyer, Corporate Regulatory Matters Attorney

Stanley Polit concentrates his practice in transactional, corporate and regulatory aspects of financial services matters. Stan is able to provide legal services to a wide variety of clients including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Stan served as a council member for a national crisis management firm, where he specialized in crisis communication and merged media strategies. He has lectured extensively and conducted trainings related to these topics at numerous national and international conferences, including the National Communication Association's National Convention, the International Crisis and Risk Communication Conference and the Disaster Recovery Journal's World Business Continuity Conference.