Recent FINRA Action Underscores Risks of Using Aggregated and Projected Performance

Summary:

• On January 26, 2026, a member firm submitted an Acceptance, Waiver, and Consent ⁽¹⁾ to settle violations arising from communications used to market private placement offerings issued by an affiliate.
• The member firm was found to have violated FINRA Rules 2210(d), 2010, 3110 and 4530 and was fined $175,000.

Relevant Facts:

• The member firm sold more than 200 private placement offerings issued by its affiliate.
• Violations:
  • The member firm included aggregated performance metrics that were misleading because the aggregation obscured the performance of specific deals and investments. FINRA rules prohibit communications that are false, exaggerated, misleading, or that omit material facts.
  • The firm’s retail communications included projected investment  performance, including IRRs and investment multiples.

Takeaways:

• Aggregating Performance Metrics: Member firms should ensure that any performance presentation accurately reflects the diversification benefits, time periods and the structure of the product being marketed.  In this case, the marketing materials reflected the performance of a much broader set of investments than were actually being offered to clients.
• Projections in FINRA Materials: This case suggests that FINRA may be applying heightened scrutiny to communications directed at retail investors compared to those sent to institutional audiences. FINRA underscored the retail nature of the intended recipients in the settlement, reinforcing this point. The distinction is particularly important with respect to projected and hypothetical performance, which is permitted under the SEC Marketing Rule but remains prohibited under current FINRA regulations.

_{(1) FINANCIAL INDUSTRY REGULATORY AUTHORITY LETTER OF ACCEPTANCE, WAIVER, AND CONSENT NO. 2021069391001}