FINRA Rule 2214

FINRA Rule 2214 sits within the 2200 Communications and Disclosures subsection of the 2000 Duties and Conflicts rules, immediately following FINRA Rule 2213's Requirements for the Use of Bond Mutual Fund Volatility Ratings and immediately preceding FINRA Rule 2215's Communications with the Public Regarding Security Futures.

FINRA Rule 2214(a): General Considerations — The Limited Exception and No-Endorsement Prohibition

FINRA Rule 2214(a) establishes two foundational principles. First, this Rule provides a limited exception to Rule 2210(d)(1)(F). FINRA Rule 2210(d)(1)(F) states that communications may not predict or project performance, imply that past performance will recur, or make any exaggerated or unwarranted claim, opinion or forecast. Without FINRA Rule 2214's exception, member firms could not offer interactive tools that project the likelihood of achieving various investment outcomes — precisely the function that retirement planning calculators, asset allocation models, and similar planning tools serve.

FINRA Rule 2214 carves out a limited exception from this prohibition — permitting members to offer investment analysis tools that produce simulations and statistical analyses presenting the likelihood of various investment outcomes, provided the specific content, disclosure, and access requirements the rule prescribes are satisfied. The word limited is significant — the exception is not a general permission to project performance, but a carefully bounded permission applicable only to tools meeting the rule's definition and used in compliance with its requirements.

Second, FINRA Rule 2214(a) establishes an explicit no-endorsement prohibition — no member may imply that FINRA endorses or approves the use of any investment analysis tool or any recommendation based on such a tool. This prohibition directly addresses the potential for member firms to market their investment analysis tools in a manner suggesting FINRA has assessed and approved their methodology, when in fact FINRA's access to the tool (required under the rule's current framework) does not constitute an endorsement or approval of the tool's outputs. Misuse of FINRA's name in connection with investment analysis tools would violate both this provision and FINRA Rule 2210's general prohibition on attributing statements to FINRA without authorization.

FINRA Rule 2214(b): The Definition of Investment Analysis Tool

FINRA Rule 2214(b) defines the foundational term — an investment analysis tool is an interactive technological tool that produces simulations and statistical analyses that present the likelihood of various investment outcomes if certain investments are made or certain investment strategies or styles are undertaken, thereby serving as an additional resource to investors in the evaluation of the potential risks and returns of investment choices.

Four characteristics of this definition merit attention. First, the tool must be interactive — a static brochure or chart projecting investment returns is not an investment analysis tool within this definition, even if it presents probability information. The interactivity requirement reflects the rule's focus on tools that respond to customer-specific inputs, generating individualized outputs based on the customer's particular circumstances. Second, the tool must produce simulations and statistical analyses — the outputs must have a probabilistic, scenario-based character, not merely compute a mathematical result from user-assumed inputs. Supplementary Material .01 confirms this distinction — the rule does not apply to hypothetical illustrations of mathematical principles that do not predict or project the performance of an investment or investment strategy, such as a website calculator that computes future returns based upon assumed variables (since Rule 2210(d)(1)(F) does not prohibit, and Rule 2214 thus does not cover, such simple mathematical calculators). Third, the tool must present the likelihood of various investment outcomes — it must address probability of achieving different outcomes, not merely display one assumed scenario. Fourth, the tool must serve as an additional resource in the evaluation of potential risks and returns — characterizing the tool as supplementary to, not a replacement for, the overall suitability and investment analysis process.

FINRA Rule 2214(a): The Post-Use Access Requirement

A member that offers or intends to offer an investment analysis tool under this Rule — whether customers use the member's tool independently or with assistance from the member — must, within 10 business days of first use, provide FINRA's Advertising Regulation Department access to the investment analysis tool. This post-use access requirement replaced the prior pre-use filing requirement under NASD IM-2210-6, which required members to file with the Advertising Regulation Department templates for written reports produced by, or retail communications concerning, the tool within 10 business days of first use. The 2016 amendments eliminated the template filing requirement, replacing it solely with the requirement to provide FINRA access to the tool itself.

The elimination of the template filing requirement reflected FINRA's finding that firms had largely complied with this aspect of the prior rule, and that direct access to the tool itself provides better insight into the tool's actual function than written description templates — enabling the Department to request any supplemental information or modifications it determines necessary. Under Supplementary Material .02, the Department may require the member to modify the investment analysis tool, written-report template, or retail communication, and may require the member to stop offering or using the tool or any related retail communication until specified changes have been made.

The access requirement does not apply to a member that offers an investment analysis tool exclusively to institutional investors as defined in FINRA Rule 2210(a)(4), if the communications relating to or produced by the tool meet the criteria for institutional communication under FINRA Rule 2210(a)(3) — confirming the rule's primary focus on retail-investor-facing tools where the investor protection concerns are most acute.

FINRA Rule 2214(c): Required Content and Disclosures — The Four Elements

FINRA Rule 2214(c) establishes the four required content and disclosure elements that any investment analysis tool, written report produced by such a tool, and related retail communications must satisfy:

Element (1) — Criteria and Methodology Disclosure. The tool or communication must describe the criteria and methodology used, including the investment analysis tool's limitations and key assumptions. This element directly addresses the core transparency concern associated with investment analysis tools — investors using a Monte Carlo simulation-based retirement planning tool, for example, may not understand that the outputs are heavily dependent on assumptions about future market returns, inflation rates, and portfolio composition that the tool's designers have embedded in its model. The criteria and methodology disclosure, combined with the limitations and key assumptions disclosure, ensures that customers receiving outputs from the tool have the information necessary to understand what those outputs actually mean and what they do not account for.

Element (2) — Non-Investment Comparison Disclosure Where Applicable. Where the tool, written report, or retail communication compares a security or investment strategy with a non-investment (such as a savings account, a CD, or the customer's current insurance coverage), it must include fair and balanced disclosure regarding the differences between the investment and the non-investment, including (as applicable) investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features. This non-investment comparison disclosure prevents the tool from presenting an investment in an unfavorably comparative light relative to a non-investment alternative without providing the full picture of the relevant trade-offs — ensuring that risk/return comparisons between investment products and guaranteed non-investment products (like bank savings accounts) reflect the full spectrum of differences, not only the most favorable aspects of the investment product.

Element (3) — Universe and Selectivity Disclosure. If applicable, the tool or communication must describe the universe of investments considered in the analysis, explain how the tool determines which securities to select, disclose if the tool favors certain securities and, if so, explain the reason for the selectivity, and state that other investments not considered may have characteristics similar or superior to those analyzed. This universe and selectivity disclosure is particularly important given Supplementary Material .06's specific treatment of investment analysis tools that favor certain securities — members are not permitted to use investment analysis tools in retail communications without disclosing if those tools search, analyze, or favor certain securities based on revenue received by the member in connection with those securities, or if the tool is limited to securities in which the member makes a market, serves as underwriter, or has other direct or indirect interests.

Element (4) — The Standard Hypothetical Performance Disclaimer. The tool or communication must display the following required disclosure: "IMPORTANT: The projections or other information generated by [name of investment analysis tool] regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results." This standardized disclaimer — set off by the bold "IMPORTANT" label and required to use the specific language prescribed — directly tracks the character of investment analysis tool outputs: they are hypothetical (based on models and assumptions, not actual market conditions), do not reflect actual investment results (no customer's actual portfolio follows the model's assumptions exactly), and are not guarantees of future results (past model performance is not indicative of future model accuracy). All four disclosure elements, including this disclaimer, must be clear and prominent and in written (which may be electronic) narrative form.

Member Responsibility Under Supplementary Material .04

Supplementary Material .04 establishes a comprehensive responsibility standard for members offering investment analysis tools — a member that offers an investment analysis tool under this Rule is responsible for ensuring that use of the investment analysis tool and all recommendations based on the investment analysis tool (whether made via the automated tool or a written report) comply, as applicable, with FINRA's suitability rule (FINRA Rule 2111), the other provisions of FINRA Rule 2210 (including the principles of fair dealing and good faith, the prohibition on exaggerated, unwarranted or misleading statements or claims, and any other applicable filing requirements for retail communications), the federal securities laws (including the antifraud provisions), the SEC rules (including Securities Act Rule 156), and other FINRA rules.

This comprehensive responsibility formulation confirms that compliance with FINRA Rule 2214's specific requirements does not constitute a safe harbor from other applicable regulatory obligations. A member whose investment analysis tool generates a recommendation — whether automated or embedded in a written report — remains responsible for ensuring that recommendation satisfies FINRA Rule 2111's suitability standard for the specific customer, regardless of whether the tool itself was properly disclosed under FINRA Rule 2214. The cross-reference to FINRA Rule 2111 directly confirms the connection this dictionary noted in examining that rule's Supplementary Material .03's explicit safe harbor for asset allocation models that comply with Rule 2214.

The Incidental Reference Exclusion Under Supplementary Material .05

Supplementary Material .05 provides an important scope limitation for retail communications that merely mention an investment analysis tool without providing substantial content about it. A retail communication that contains only an incidental reference to an investment analysis tool — for example, a brochure that merely mentions the member's tool as one of the services offered — need not include the disclosures required by FINRA Rule 2214 and would not need to be filed with the Department, unless otherwise required by other FINRA Rule 2210 provisions.

A retail communication that refers to an investment analysis tool in more detail but does not provide access to the tool or the results it generates must include only elements (c)(2) and (c)(4) — the non-investment comparison disclosure and the standard hypothetical performance disclaimer — but may exclude elements (c)(1) and (c)(3) (the criteria/methodology disclosure and the universe/selectivity disclosure, which are most relevant when the customer is actually using or receiving output from the tool).

This tiered approach — incidental reference requires no disclosure, partial description requires elements (2) and (4) only, and actual tool use or output requires all four elements — reflects a proportionality principle aligning the disclosure burden with the investor protection concern: a brochure mentioning an available tool presents minimal investor confusion risk, while a communication providing tool outputs without methodology disclosure presents a meaningful risk that customers will misinterpret probabilistic projections as performance guarantees.

Connection to FINRA Rules 2111, 2210, 2213, 2215, 2216, and 3110

FINRA Rule 2214 connects directly and by explicit cross-reference to FINRA Rule 2111 — whose suitability standard, including the asset allocation model safe harbor in Supplementary Material .03 and the member responsibility formulation in Supplementary Material .04, governs all recommendations produced by or based on investment analysis tools covered by Rule 2214. It connects directly to FINRA Rule 2210 — as the general communications standard whose Rule 2210(d)(1)(F) projection prohibition FINRA Rule 2214 provides a limited exception to, and whose filing requirements, content standards, and principles of fair dealing and good faith govern investment analysis tool communications alongside Rule 2214's specific requirements. It connects to FINRA Rule 2213 — sharing the same 2200 subsection and the same 2016 SR-FINRA-2016-018 amendment filing that streamlined both rules' requirements. It connects to FINRA Rules 2215 and 2216 — the other product-specific communications rules in the same subsection. And it connects to FINRA Rule 3110 — whose supervisory requirements must address the investment analysis tool compliance obligations Rule 2214 establishes, including procedures for reviewing tools and their associated communications against Rule 2214's access, content, and disclosure requirements.

Examination Relevance and Key Takeaways

FINRA Rule 2214 is tested on the Series 7 and Series 24 examinations as the investment analysis tool requirements framework — the rule enabling members to offer probability-based planning tools while ensuring customers understand the hypothetical character of those tools' outputs.

The key points to retain are these: FINRA Rule 2214 provides a limited exception to FINRA Rule 2210(d)(1)(F)'s prohibition on projecting or predicting investment performance, allowing members to offer interactive technological tools that produce simulations and statistical analyses presenting the likelihood of various investment outcomes; no member may imply FINRA endorses or approves any investment analysis tool or tool-based recommendation; an investment analysis tool is an interactive technological tool (not a simple mathematical calculator) producing simulations and statistical analyses of the likelihood of various investment outcomes — simple calculators computing future returns from assumed variables are not covered; within 10 business days of first use, members must provide FINRA's Advertising Regulation Department access to the tool — the prior template filing requirement was eliminated by the 2016 amendments; tool use, written reports, and related retail communications must include four disclosure elements: (1) criteria, methodology, limitations and key assumptions; (2) fair and balanced non-investment comparison disclosures where applicable; (3) universe of investments considered and selectivity disclosures if the tool favors certain securities; and (4) the standard IMPORTANT hypothetical disclaimer stating outputs are hypothetical, do not reflect actual results, and are not guarantees of future results; all disclosures must be clear, prominent, and in written narrative form; members are responsible under Supplementary Material .04 for ensuring all tool use and tool-based recommendations comply with FINRA Rule 2111, FINRA Rule 2210, applicable securities laws, and other FINRA rules; and incidental references to investment analysis tools in retail communications require no disclosures and no filing unless otherwise required by Rule 2210. The rule was adopted via SR-FINRA-2011-035 and amended via SR-FINRA-2016-018 effective November 2016.