MFA submitted a letter to the U.S. Securities and Exchange Commission (SEC) on Financial Industry Regulatory Authority’s (FINRA) proposal to ease restrictions on the use of target and projected returns within Rule 2210.
MFA supports FINRA’s modernization efforts and suggested the following improvements to the proposal:
- Expand the scope of permitted hypothetical performance to align with the SEC’s Marketing Rule;
- Address carved-out and subset track records explicitly, confirming that performance derived from actual investments (such as sector-specific or strategy-specific subsets) may be presented provided the methodology is disclosed;
- Eliminate the proposed “reasonable basis” and enhanced recordkeeping requirement, as inconsistent with the Marketing Rule and unnecessary given other FINRA rule provisions;
- Update FINRA guidance regarding internal rate of return (“IRR”) by revoking that portion of Regulatory Notice 20-214, clarifying the uses and presentation of IRR to more flexibly conform to industry practices
