Interpretive letter outlines the conditions for the use of
exchange-traded product marketing materials containing
pre-inception index performance, including disclosure requirements,
performance presentation standards, and a limitation on
distribution to only institutional investors.
On April 22, the Financial Industry Regulatory Authority, Inc.
(FINRA) issued an interpretative letter regarding the use of
pre-inception index performance (PIP) data for exchange-traded
products (ETPs). The letter formalizes a position with respect to
the use of PIP data (sometimes referred to as
"hypothetical" or "backtested" index data) in
communications with institutional investors.1
All communications by FINRA-member broker-dealers are subject to
FINRA Rule 2210, which imposes, among other things, content
standards, internal approval, review and recordkeeping
requirements, and possible filing obligations with FINRA's
Advertising Regulation Department. In recent years,
