Communications with the Public
FINRA Rule 2210 governs how broker-dealers communicate with customers and the public. Understanding communication categories and requirements is essential for compliance.
Three Categories of Communications
FINRA Rule 2210 divides communications into three categories based on audience:
| Category | Definition | Audience |
|---|---|---|
| Retail Communication | Distributed to more than 25 retail investors in 30 days | General public |
| Correspondence | Distributed to 25 or fewer retail investors in 30 days | Limited audience |
| Institutional Communication | Distributed only to institutional investors | Institutions |
Who is an Institutional Investor?
| Institutional Investor | Examples |
|---|---|
| Banks and insurance companies | JPMorgan, MetLife |
| Registered investment companies | Mutual funds |
| Registered investment advisers | RIAs |
| Persons with $50+ million in assets | High-net-worth entities |
| Government entities | State pension funds |
| Employee benefit plans | 401(k) plans with $50M+ |
Approval and Filing Requirements
Retail Communications
| Requirement | Details |
|---|---|
| Principal Approval | Required BEFORE first use |
| Filing with FINRA | Required for certain types |
| Recordkeeping | Must retain for 3 years |
What Must Be Filed with FINRA
| Must File | Details |
|---|---|
| New member firms | All retail communications for first year |
| Securities in registration | Pre-use filing required |
| Investment companies | Performance advertising |
| Options | Options communications |
| CMOs | Collateralized mortgage obligations |
Filing Timeline
| Situation | Timeline |
|---|---|
| New member | 10 business days BEFORE first use |
| Established member | Within 10 business days of first use |
| Free writing prospectus | Same day as first use |
Correspondence
| Requirement | Details |
|---|---|
| Principal Approval | NOT required before use |
| Supervision | Firm must have supervisory procedures |
| Review | Subject to spot-checking |
| Filing | NOT required with FINRA |
Institutional Communications
| Requirement | Details |
|---|---|
| Principal Approval | NOT required before use |
| Supervision | Firm procedures must ensure compliance |
| Filing | NOT required with FINRA |
Content Standards
All communications must be:
General Standards
| Standard | Description |
|---|---|
| Fair and Balanced | Present risks and benefits |
| Not Misleading | No false or exaggerated claims |
| Clear and Prominent | Important info not buried |
| Sound Basis | Claims must be supportable |
Specific Prohibitions
| Prohibited | Example |
|---|---|
| Guarantees | "This investment will double" |
| Predictions | "The stock will reach $100" |
| Exaggerated Claims | "Completely safe investment" |
| Omitting Risk | Promoting benefits without discussing risk |
| Misleading Comparisons | Comparing unlike investments unfairly |
Required Disclosures
| Disclosure | When Required |
|---|---|
| Firm name | All communications |
| FINRA membership | All communications to public |
| Risk factors | With performance data |
| Past performance disclaimer | Investment performance |
| Conflicts of interest | When material |
Testimonials and Endorsements
SEC Marketing Rule Requirements
Testimonials and endorsements are now permitted under SEC rules with conditions:
| Requirement | Details |
|---|---|
| Disclosure | Must disclose compensation and conflicts |
| No Cherry-Picking | Cannot show only positive results |
| Prominent Display | Disclosures must be clear |
| Recordkeeping | Document testimonials used |
Social Media and Electronic Communications
Social Media Categories
| Type | Treatment |
|---|---|
| Static content | Treated as retail communication |
| Interactive content | May be correspondence |
| Real-time | Live chat—different rules |
Social Media Requirements
- Firm must have supervisory procedures
- Third-party posts may require monitoring
- Hyperlinks may be problematic if they imply endorsement
- Personal accounts discussing business are covered
Recordkeeping for Electronic Communications
All business-related electronic communications must be:
- Retained for required period (typically 3-4 years)
- Stored in non-rewriteable format
- Accessible upon regulatory request
On the Exam
The Series 7 exam frequently tests:
- Three communication categories and thresholds
- Principal approval requirements
- Filing requirements with FINRA
- Content standards (fair, balanced, not misleading)
- Prohibited practices (guarantees, predictions)
A registered representative sends an email about a new bond offering to 30 retail customers. This communication is classified as:
Which category of communication requires principal approval BEFORE first use?
Which of the following statements would be PROHIBITED in a retail communication?
An entity qualifies as an institutional investor for communications purposes if it has assets of at least:
A new FINRA member firm must file retail communications with FINRA's Advertising Regulation Department:
12.4 Prohibited Activities
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