Marketing materials for private funds often state that the fund’s manager will seek to achieve an annual return (a “targeted return”) of X percent. Is this legally permissible? The answer depends in part on whether the materials are used by a registered broker-dealer, and, if so, how one reads relevant Financial Industry Regulatory Authority (FINRA) precedents. FINRA’s less-than-transparent approach to the question fuels debate within the private funds industry, and is even a factor in some fund managers’ regulatory strategies.
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