SEC Clears Way for Brokers to Promote Their Investment Performance -- Barrons.com

By Kenneth Corbin

Financial advisors registered as brokers could soon be able to promote their practices in communications to clients and prospects by including investment performance and target returns for their strategies. The Securities and Exchange Commission on Thursday approved a proposal to loosen restrictions on investment performance advertising, bringing the rules for brokers closer to the regulatory framework that governs registered investment advisors.

Finra, the brokerage industry's self-regulatory authority, released its proposal in February, opening a public-comment period before sending the final version to the SEC for approval.

Finra's default setting under its rule governing communications with the public generally prohibits messaging that includes performance projections, but it includes three exemptions. The rule change adds a fourth.

In the past, brokers have been able to include mentions of performance in their communications if that content was considered a nonpredictive hypothetical illustration of a mathematical principle. Also, they could include projections from certain simulations and other investment analysis tools as well as price targets for individual stocks that were included in research reports.

The new rule is less specific and more broadly applicable to financial advice. It would permit brokers to communicate projected performance or target returns if they can show that the communication is relevant to the audience's financial situation and objectives. "Finra stated that, under such reasonably designed policies and procedures, a communication containing projected performance or targeted returns should only be distributed to investors whom a [broker] reasonably believes have access to resources to independently analyze this information and who have the financial expertise to understand the risks and limitations of these types of presentations," the SEC writes in its order approving the rule.

Still targeted. That targeted-audience provision means that the "rule change generally would not permit the inclusion of projected performance or targeted returns in communications for a mass audience or intended for general circulation, including a general retail investor audience," the SEC says.

The updated regulation tracks closely with the framework the SEC established for investment advisors in its Marketing Rule. The agency has brought numerous enforcement actions against advisor firms for communicating performance projections to a general audience, such as by posting them on their website.

Uneven playing field. Many of the comments Finra received were submitted by industry groups that hailed the move as a welcome step toward leveling the playing field between brokers and advisors. The Wall Street group Sifma, for instance, noted that the regulatory gap "affects investors, particularly clients of dual registrants, by resulting in uneven access to information about the same investment strategies depending solely on the regulatory channel through which the communication is delivered."

The Public Investors Arbitration Bar Association, an investor-advocacy group, opposed the rule, noting that regulators have historically viewed performance projections as an "unbalanced sales presentation" that more heavily emphasizes potential returns than risks.

Aligning with the SEC's Marketing Rule, the group argued, is a "race to the regulatory bottom," but it also noted that advisors citing projected performance are still bound by their fiduciary duty, "meaning that whatever return-based projections are disseminated to clients will be held to the strictest scrutiny."

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October 20, 2026 15:55 ET (19:55 GMT)