Request for Comment on Regulatory Notice 26-14 Proposals

Summary

SIFMA ¹ provided comments on the Financial Industry Regulatory Authority's ("FINRA") proposed changes to modernize FINRA Rule 2210 as laid out in Regulatory Notice 26-14 ("RN 26-14"). SIFMA supports FINRA's efforts to modernize the regulatory framework, facilitate innovation, and eliminate unnecessary burdens on its members.

Excerpt

RN 26-14 rightfully recognizes the need to streamline the communications processes and requirements spurred by emerging technologies, changing investor expectations, new business models, and global competition while still protecting investors. SIFMA believes modernization should focus on preserving the substantive investor protection objectives of Rule 2210 while allowing firms to determine, through reasonable policies and procedures, how best to achieve those objectives in light of their business models, communication channels, technologies, and customer bases. It also recognizes that legacy rules must be reassessed to ensure that they remain fit for purpose and do not impose unnecessary burdens or needless friction.

More broadly, SIFMA also recommends FINRA use this regulatory notice to resolve items considered as part of the broader modernization effort. Accordingly, these considerations include expanding permitted hypothetical performance to align with the Marketing Rule, such as model and back-tested performance; addressing extracted and carved-out performance track records, confirming that performance derived from actual investments may be presented provided the methodology is disclosed; and revising the guidance on internal rates of return set forth in Regulatory Notice 20-21 to give firms greater flexibility in the methodologies they may use. Resolving these divergences would provide much-needed guidance to address issues firms face today, and SIFMA urges FINRA to prioritize this alignment as a core objective of the rulemaking.

Further, we note that many of the proposed changes are contingent on other proposed or existing requirements, so any changes beyond what is currently included should be reviewed with those contingencies in mind. SIFMA is available to assist in reviewing any such additional anticipated changes.

I. Executive Summary

SIFMA supports FINRA's proposed modernization of Rule 2210 in RN 26-14 and offers the following comments and recommendations:

• Risk-based supervision: SIFMA supports replacing principal pre-use approval with a risk-based assessment standard, but requests additional guidance on the education-versus-promotion line and questions whether medium and distribution method should remain a relevant factor. SIFMA also asks FINRA to reconcile this shift with the existing filing-approval requirements in Rule 2210(b)(1)(A), including voluntary filings.
• Static/interactive distinction: SIFMA supports eliminating the static-versus-interactive classification as proposed and recommends FINRA confirm that risk turns on audience specificity and personalization, not on platform or content format.
• Filing requirement changes: SIFMA supports both proposed filing changes: tying new-member filing obligations to first communication rather than CRD effective date and shifting registered investment company performance-ranking filings from pre-use to within 10 business days of first use.
• Rule 2210(d)(7): SIFMA supports deleting the current provisions in favor of a general fair-and-balanced standard for referencing past recommendations.
• Technology neutrality for AI: SIFMA supports FINRA's decision not to impose AI-specific requirements and instead apply the existing risk-based framework across all communication types.
• Additional recommendations: SIFMA urges a parallel review of Rule 2220, expansion of the institutional investor definition to include qualified purchasers, alignment of Regulatory Notice 17-18 with the SEC Marketing Rule, and continued progress on the pending Rule 2210 projections-of-performance amendments.