BD Fined for Target Performance in PPMs
FINRA fined a broker-dealer for misleading statements made in fund PPMs distributed by the BD. FINRA claims that the PPMs included target returns without a reasonable basis for making the statements and which “were not supported by prior performance.” The funds were sponsored by affiliates of the BD.
OUR TAKE: FINRA has periodically dabbled into a BD’s responsibility for PPM disclosure. (See NtM 03-07.) This case was easier for FINRA because the BD sold affiliated funds. Separately interesting is the suggestion that target performance could be permissible if supported by prior performance.