In updated guidance (FAQ D.7.1), FINRA clarified that broker-dealers' retail communications concerning private placement offerings may include operating metrics but not "target returns."
The new FAQ specifies that FINRA Rule 2210(d)(1)(F) prohibits investment predictions, performance expectations, "target returns" or any opinions regarding investment returns in its retail private placement communications, even if the underlying assumptions and probable risks are included. (This consideration was further explained in FINRA Regulatory Notice 20-21.) The restriction extends to predicted yields, income, dividends, capital appreciation, percentages or any future investment performance.
FINRA clarified that Rule 2210(d)(1)(F) allows firms to include in their private placement offerings issuer operating metrics, such as forecasted sales, revenues and customer acquisition numbers, as long as the firms also provide a "sound basis" for such predictions. Issuer operating metrics can be used by investors to evaluate the soundness of the investment.
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