The SEC Just Let Brokers Put a Target Return in Writing

Until yesterday, a broker could tell you what a stock might be worth, but could not put in writing what a fund aims to earn you. The SEC just changed that, and I think the change is half right and half sloppy. The sloppy half is the part nobody is reading.

Key Highlights

• The action: On October 15, 2026 the SEC approved FINRA's amendment to Rule 2210, adding a fourth exception that lets a broker-dealer communicate projected performance or targeted returns for a security, a portfolio, or an investment strategy.¹
• The clock: FINRA filed the proposal on February 10, 2026, the SEC opened formal proceedings on May 20, and FINRA modified the text on July 2.²
• The give-back: Partial Amendment No. 1 removed three express requirements, including disclosure of whether a projection is net of fees and a stated reasonable-basis rule with supporting records.³
• The limit: FINRA said these communications generally would not suit a mass audience, including a general retail audience, and expects the rule to affect mainly institutional and other sophisticated investors.⁴
• The idea: Blackstone (BX) trades at $107.36, 35.0% below its 52-week high of $165.14, on 14.5 times consensus 2027 earnings of $7.39 a share.⁵

Here is the oddity. If an equity analyst at a bank writes that a stock is worth $140, that is a price target, and the rules already allow it. If a fund sponsor tells an advisor that a strategy is built to earn 8 percent a year, that was, in most broker-dealer communications, forbidden. The first number is a guess about a stock. The second is a stated goal about a strategy. We allowed the guess and banned the goal.

That asymmetry is now partly gone.

The surface story

FINRA Rule 2210 governs what member firms say to the public. Paragraph (d)(1)(F) generally prohibits communications that predict or project performance. The SEC's order says FINRA reads that prohibition to cover target returns as well, in these words: "This prohibition extends to retail communications that include target returns to investors".⁶

The old rule had three escape hatches. A firm could show a hypothetical illustration of a mathematical principle. It could use an investment analysis tool that meets Rule 2214. And it could publish price targets in research reports on debt or equity securities, with a reasonable basis, a disclosed valuation method and disclosed risks.⁷

The approved amendment adds a fourth. A member may communicate projected performance or targeted returns for a security, a securities portfolio, or an asset allocation or other investment strategy. FINRA describes a projection as an estimate of future performance built on historical data and assumptions, usually from mathematical modeling, and a targeted return as an aspirational goal.⁸

The path to approval took eight months. FINRA filed on February 10, 2026, and the SEC published the notice on February 20 as Release 34-104877.⁹ The SEC then instituted proceedings on May 20 (Release 34-105524) and noticed Partial Amendment No. 1 on July 2 (Release 34-105845), with comments due July 28.²

That is the surface. The surface is incomplete.

The quiet second document

The headline is the new exception. The real story sits in what FINRA deleted between the proposal and the approval.

The original proposal required a firm to disclose whether a projection was net of anticipated fees and expenses. It required disclosure of the reasons actual performance might differ. And it required a reasonable basis for the criteria and assumptions, plus written records supporting that basis. Partial Amendment No. 1 removed all three express requirements and added a narrower recordkeeping duty: keep records "concerning the source of any projection of performance or targeted return used".¹¹

Mayer Brown's March summary of the original proposal shows how much weight the reasonable-basis rule carried. A firm using a third party's projection, from an issuer or sponsor for example, had to gather enough information to form its own reasonable basis for that party's assumptions.¹³ That sentence is gone from the final text as an express duty.

What remains? Written policies and procedures reasonably designed to make sure the communication is "relevant to the likely financial situation and investment objectives of the intended audience." Sufficient information for that audience to understand the criteria and assumptions, and the risks and limitations. And records of the source. Rule 2210's general standards still apply: fair and balanced, no omission of material facts, no promissory or exaggerated claims.¹⁴

The SEC's answer to the critics is that those general standards, together with the recordkeeping duty, effectively require a firm to substantiate what it publishes.¹⁵ I buy part of that. A firm that cannot support a number is still exposed under the general content standards. But I would have kept the fee disclosure. A gross target and a net target are different promises, and an investor deserves to know which one is on the page.

Who wins and who loses

Start with who is not covered, because the headlines blur it. This is not a license to put projections in front of the general public. FINRA said communications of this kind generally would not be appropriate for a mass audience or general circulation, including a general retail audience. It expects the rule to affect mainly communications to institutional and other sophisticated investors, and it said an investor's interest in high returns does not by itself make the information relevant to that investor.¹⁶

So the first winners are firms that sell to institutions and sophisticated clients through broker-dealers. They can now put in writing what they used to say on a call and hope the compliance officer never asked about. Sponsors of alternative products gain the most. The Alternative and Direct Investment Securities Association listed the products it has in mind: non-traded REITs and BDCs, private placements, interval funds, tender offer funds, Delaware statutory trusts, qualified opportunity zone funds and oil and gas funds, many with long horizons, periodic distributions and little track record to cite.¹⁷ For a fund with three years of history, a stated target is often the only forward-looking fact available.

The second winners are compliance departments with budgets. SIFMA, the Investment Company Institute, the Investment Adviser Association, the Managed Funds Association and the Institute for Portfolio Alternatives all supported the change.¹⁸ I will say what I think about that list in a minute.

The losers are narrower than the critics claim, but real. A small firm with no policy infrastructure now has a new exception that comes with a written-procedures burden. A large firm writes the procedures once and reuses them. Another rule that rewards scale is not a free market. It is a moat with a ribbon on it.

The investors who rely on the old bright line lose a bright line. The old rule was easy to enforce: no projection, no problem. The new one asks examiners to judge whether an audience was appropriate and whether the information was sufficient. Judgment calls are where cases get argued for years. You should expect the first enforcement matter under the exception to teach us more than the order did.

The numbers

Three numbers frame the debate. The first is zero: the order does not state an effective date or an implementation timeline, so I cannot tell you when the first firm will use it.¹⁰ The second is three: the number of express requirements the final text dropped. The third is the opposition. The Public Investors Advocate Bar Association and the North American Securities Administrators Association both objected, and NASAA said it could not support the proposal "without better investor protection guardrails incorporated into the text of the rule".¹⁹

I looked for a count of comment letters and the order does not give one. It names supporters and opponents as examples and does not claim a complete tally.²⁰ So I will not give you a vote count I cannot source.

One more number matters for the market idea below. Publicly traded alternative managers sit well below their highs. Blackstone is 35.0% below its 52-week high, Ares 38.1% below and Apollo 26.6% below, by my arithmetic from today's quotes.²¹

The free-market read

Let me give the other side its best argument first, because it is a good one.

PIABA, which represents lawyers who sue brokers on behalf of investors, argued that concerns about broker-dealers' competitive position should not outrank investor protection, and it warned about misleading and unbalanced sales presentations.²³ They are describing a real pattern. A target return is a promise in a costume. The reader sees 8 percent and remembers 8 percent. The assumptions, the fees and the risk page do not make it into memory. Anyone who has watched a client anchor on a number knows this.

I take that seriously. I still come down on the other side.

A ban on truthful, forward-looking statements is a prior restraint on speech that the buyer needs in order to price a product. Investors already live on forecasts. Companies give earnings guidance. Analysts publish price targets, which the old rule specifically allowed. Advisers regulated by the SEC operate under a marketing rule that the SEC's order treats as broader than this exception.²⁴ The same strategy could be described one way by a registered adviser and another way by a broker-dealer selling the same shares. That is not investor protection. It is a regulatory patchwork, and the client pays for the confusion.

Prices are information, and a target return is a claim about future price. Markets do not run on silence. They run on competing claims that can be checked later. The answer to a bad projection is disclosure, liability and a competitor who publishes a better one. Banning the claim just moves the conversation to the phone, where nobody can audit it. I would rather have the number on paper with the assumptions beside it.

Here is where I part ways with some of my own side. Pro-market is not pro-incumbent. The groups that cheered this order are the same groups whose members will write the policies, own the compliance staff and sell the products. SIFMA's position and the public interest line up here, and I am glad of it, but I do not take that for granted. The deletion of fee-net disclosure is a concession to the sellers, not the buyers. If a firm wants to show a gross target without saying so, the general content standards are the only thing standing between that page and a misled investor. A rule that depends on an enforcement action after the money is gone is a weak rule.

So my verdict is this. The exception is right. The deleted guardrails are a mistake I would fix. And the audience limit is the part that makes the whole thing defensible, which is why I want it enforced by actual examination, not by a sentence in an order.

The bear case

The honest bear case has four parts.

First, it may not matter. The order says the rule mainly touches institutional and sophisticated audiences, who already hear targets on calls and in private placement documents. A rule that formalizes what already happens changes paperwork, not flows.

Second, the guardrails are softer than the proposal, and softer guardrails mean more disputes. If a target return is used with the wrong audience, the dispute is about a policy that was never tested.

Third, projections that miss become evidence. A firm that writes down a number now owns that number in every later arbitration. Compliance officers will keep writing cautious language, and cautious language is invisible to the buyer.

Fourth, timing. There is no effective date in the order. FINRA may publish its own guidance, and that guidance could narrow the exception before anyone uses it. I could not find a statement of when it takes effect, and I will not guess.

Those are all fair. None of them says the rule is bad. They say it is small.

The Idea: BX (Blackstone)

This is not advice. Treat it as a way to ask who is exposed to a policy change, not as a recommendation. I am going to be careful here, because the link between a communications rule and a $123 billion company is thin and I will not oversell it.

What it is. Blackstone is one of the largest alternative asset managers, with $1.346 trillion of total assets under management at June 30, 2026.²⁵

Why the rule helps. Alternative managers sell through broker-dealers, and ADISA's list of products shows how much of that world is long-dated, thinly benchmarked and income-oriented.¹⁷ A target return is often the first thing a sophisticated buyer asks for and the last thing a compliance department allowed in writing. Lower friction on that sentence is a small tailwind for any firm that raises capital through broker-dealer channels. I do not have a Blackstone-specific figure for how much it sells that way, so I will not invent one.

The data. Fee-related earnings, the steadier stream a manager earns on assets under management, rose from $1.481 billion in the quarter ended September 30, 2025 to $1.783 billion in the quarter ended June 30, 2026, a gain of 20.4% by my arithmetic. Total AUM over the same stretch rose 8.4%.²⁶ The stock is $107.36, down 1.68% on the day, with a 52-week range of $101.73 to $165.14 and a trailing P/E of 23.9.²⁷ Consensus earnings are $5.92 for 2026 and $7.39 for 2027, which puts the stock at 18.1 times and 14.5 times by my arithmetic.²⁸

What the market may be missing. I think the market is pricing alternative managers as a single credit-and-redemptions worry, and the stock sits near the bottom of its 52-week range while fee-related earnings climb. The rule does not fix that worry. It does make one piece of the sales process a little easier. If you believe the worry is overdone, the rule is a minor second reason, not the first.

An honest comparison. Blackstone is not the cheapest name on my screen. Apollo trades at 10.6 times 2027 consensus earnings and Ares at 15.7 times, by my arithmetic from the same quotes and estimates.²⁹ If your only question is the lowest multiple, Apollo wins. I picked Blackstone because of the breadth of its fee-paying base, not because it screens cheapest.

Risks and what proves it wrong. The thesis is wrong if fee-related earnings stop growing, if private-market redemptions force asset sales at discounts, or if FINRA's follow-up guidance narrows the exception so tightly that no sponsor uses it. It is also wrong if the first enforcement action under the exception comes quickly and makes sponsors back away. The stock is 5.5% above its 52-week low, and nothing in this article says it cannot make a new one. This is a modest, second-order idea. I would rather give you a modest honest one than a loud wrong one.

What to watch next

Three things will tell you whether this matters.

First, the effective date. The order does not state one. When FINRA announces it, you will learn how fast firms can use the exception, and whether the guidance narrows it.

Second, the first marketing pieces. Watch what the first sponsors actually publish: gross or net, one scenario or several, a sentence of assumptions or a page. That will show you how much the deleted guardrails mattered.

Third, enforcement. The order leans on the general content standards. I expect the first case to turn on a gross target shown to an audience that could not read the footnotes, and I expect that case to define the rule more than anything the SEC wrote.

For related reading on how the SEC has been widening who can buy what, see The SEC Just Proposed Six New Ways Around the Wealth Test and The SEC Wants to Let Bond Funds Skip the Dealer Toll Booth.

A target is not a promise. Treat it as the start of a question, and the rule works. Treat it as an answer, and it does not.

Related analysis

• The SEC Just Proposed Six New Ways Around the Wealth Test
• The SEC Wants to Let Bond Funds Skip the Dealer Toll Booth
• FINRA Just Made Trading Fees Vanish for Q4. The Bigger Move Is 2029.

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