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.