Has your broker dealer investigated using advertising materials in order to attract new clients, promote a service that your broker dealer provides, or simply tried to establish your firm’s brand within the industry? Advertising is a great tool that can increase your broker dealer business opportunities, but it does come with rules and regulations.
If you go to the Financial Industry Regulatory Authority ‘s (“FINRA”) website and search for “advertising” guidelines, your brain might possibly explode. It is overwhelming to say the least! There are so many rules set forth by FINRA and the Securities and Exchange Commission (“SEC”). Between the actual rules and the plethora of notices, your broker dealer may be swimming against the current when it comes to advertising. However, the rules can be broken down into concise steps, and a clear process can be created.
While there are other rules and regulations for specific products, FINRA Rule 2210 is the foundation of all advertising regulations for all broker dealers. Key provisions include:
- Approval and Recordkeeping: All advertisements and sales literature must be approved by a registered principal of the broker dealer before use. The broker dealer is additionally required to maintain records of their advertisements for a specified period as determined by FINRA.
- Fair and Balanced Content: Advertisements and firm literature must provide a clear and accurate representation of not only the benefits but also the risks of any products or services offered. Mentioning guarantees, including exaggerated claims, and making predictions is strictly prohibited.
- Disclosures: Important disclosures, such as risks and fees, should be displayed in a prominent location on any advertisement. Additionally, the information should be easy to understand for any investor. Using fine print for disclosure information is strictly prohibited.
- Testimonials and Endorsements: Including testimonials and/or endorsements is a great form of advertising. However, your broker dealer must ensure that any statement is accurate, and any compensation or conflicts of interest are disclosed.
All broker dealers must follow the above protocol along with creating a robust process for the advertising process. If your broker dealer would like to speak with a compliance professional in regards to your firm’s advertising processes and procedures, please contact Master Compliance here. Our team of compliance consultants can help your broker dealer navigate through the rules and regulations, train your firm on the necessary policies and procedures, and provide you with some best practices so that your broker dealer is not only compliant, but also confident with your advertising materials.