As should be expected, broker dealers are not free to communicate with the public, including retail and institutional investors, without restrictions. The regulation of communications with the public minimizes, although it does not eliminate, the chance that the public will be misled by a firm’s advertisements. FINRA Rule 2210 establishes the standards for the content, approval, recordkeeping, and filing of communications with FINRA.
It is important to understand that all communications do not fall within the same category. FINRA categorizes communications into three types:
- Retail communication-any written communication distributed or made available to 25 or more investors in a 30 day period.
- Correspondence- written letter or electronic mail message distributed by a member to existing retail customers and fewer than 25 prospective retail customers within any 30 calendar-day period.
- Institutional communication- Any written communication, including electronic, distributed or made available only to institutional investors, such as banks, insurance companies and registered investment companies, among others. A firm’s internal communications are not covered by this definition.
According to FINRA Rule 2210, an appropriately qualified registered principal of the member must approve each retail communication before the earlier of its use or filing with FINRA’s Advertising Regulation Department. Correspondence is regulated differently than retail communication. Generally, FINRA does not require that correspondence be filed with the Advertising Regulation Department. However, it is required that firms establish supervisory procedures for the review of incoming and outgoing written correspondence and internal communications relating to the member’s investment banking or securities business. Similar to Correspondence, firms do not have to file institutional communications. However, each member must establish written procedures that are appropriate to its business, size, structure, and customers for the review by an appropriately qualified registered principal of institutional communications used by the member and its associated persons.
FINRA has made the process of filing communications with the Advertising Regulation Department fairly easy. You can file communications online via Advertising Regulation Electronic Files (AREF), an online application. Follow the link for more information regarding the online application, Advertising Regulation Electronic Files page.
For more posts related to communications with the public, please see Utilization of Social Media in the Securities Industry and Communications with the Public.