FINRA Permits Related Performance Information In Institutional Communications For Registered Closed-End Funds

Introduction

In an interpretive guidance letter issued to a registered closed-end fund on June 9, 2017, FINRA permitted the use of "related performance information" in communications that are distributed solely to institutional investors.

For purposes of the interpretive letter, "related performance information" is the actual performance of separate or private accounts or funds:

1. that have substantially similar investment policies, objectives, and strategies to those of a registered closed-end fund; and
2. are currently managed or were previously managed by the same adviser or sub-adviser that manages the applicable fund.

In connection with their marketing processes, funds with limited or no track records often seek to leverage the performance history of other accounts managed by the adviser and employing a substantially similar investment strategy. Generally, substantial disclaimers and disclosures accompany these communications so that investors are