FINRA relaxes restrictions on pre-inception performance data

Purpose: To explain the significance of a recently issued interpretive letter in which FINRA staff agreed to permit the use of pre-inception index performance data by passively managed, registered open-end investment companies. Design/methodology/approach: FINRA recently issued an interpretive letter extending previously issued guidance by permitting passively managed open-end registered investment companies including separately-managed series of a business trust to use pre-inception index performance data in Institutional Communications. Findings: The 2019 Letter is an important shift in how FINRA staff views PIP data in Institutional Communications by acknowledging that passively managed open-end funds should be treated in a similar manner as passively managed exchange-traded funds. This shift will be a welcome development for FINRA member firms wishing to include PIP data in marketing materials for the passively managed open-end funds they distribute. Originality/value: Practical guidance from experienced investment management and broker-dealer lawyers.