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FINRA Loosens Restrictions on Related Performance Information for Institutional Investors

FINRA recently published an interpretive letter that permits the use of “Related Performance Information” in mutual fund marketing materials provided to institutional investors, subject to certain restrictions and required disclosures. According to an alert from Ropes & Gray, the change is “particularly important in cases where an investment adviser has been employing an investment strategy that will be used for a new mutual fund that lacks its own performance history.”

The letter defines Related Performance Information as “actual performance of all separate or private accounts or funds that have (i) substantially similar investment policies, objectives, and strategies, and (ii) are currently managed or were previously managed by the same adviser or sub-adviser that manages the registered mutual fund that is the subject of an institutional communication.” According to Ropes & Gray, the term “institutional investor” includes “broker-dealers, SEC- or state-registered investment advisers, banks, insurance companies, governmental entities, certain qualified plans, and any person (whether a natural person or otherwise) with total assets of at least $50 million (this list is non-exhaustive).” As a result, the related performance information may be provided to financial intermediaries who may sell the funds to retail customers, according to the alert.