The Financial Industry Regulatory Authority is providing its members with information they need to help them understand and apply its advertising rules.
On its web site, FINRA has a rundown of key topics related to Rule 2210, which involves communications with the public. The rule categorizes all communications into three categories—correspondence, retail communications or institutional communications—and sets principles-based content standards that are designed to apply to ongoing developments in communications technology and practices.
The authority’s Advertising Department monitors compliance with the rules. It protects investors by ensuring that broker-dealers’ communications are fair, balanced and not misleading and comply with the advertising rules of FINRA, the SEC, the MSRB and SIPC. Through its filings review program, the Department reviews communications submitted by firms either voluntarily or as required by FINRA Rule 2210 and provides firms with a written review for every communication submitted.
FINRA’s overview of key topics involving the advertising rule includes a list of Frequently Asked Questions that are meant to provide interpretive guidance to firms.
For example, one question pertains to the definition of institutional communications:
.”If a firm distributes an institutional communication to intermediaries that fall within the definition of “institutional investor” and labels the communication for use only with institutional investors, and an intermediary subsequently distributes the communication to retail investors, is the member then required to treat the communication as a retail communication?”
The answer: “Unless the firm becomes aware that the intermediary has distributed the communication to retail investors, or the firm has not adequately labeled the communication, the firm will not be required to treat the communication as retail. FINRA Rule 2210(a)(3) defines “institutional communication” as “any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member’s internal communications.” FINRA Rule 2210(a)(4) (the definition of “institutional investor”) states in part that “No member may treat a communication as having been distributed to an institutional investor if the member has reason to believe that the communication or any excerpt thereof will be forwarded or made available to any retail investor.”
Another example involves filing requirements: “Is a firm required to file with FINRA a retail communication concerning a business development company (BDC) that is registered under the Securities Act?”
Answer: “Yes. BDCs fall within the definition of direct participation program under FINRA Rule 2310(a)(4). Accordingly, firms must file with FINRA retail communications concerning BDCs that are registered under the Securities Act within 10 business days of first use or publication pursuant to FINRA Rule 2210(c)(3)(B).”
The list of questions covers a number of areas including approval, review and recordkeeping, filing requirements and filing exclusions, content standards, limitations on use of FINRA’s name, public appearances, and SEC advertising rules. Firms are also provided with information on how to file communications for review by FINRA.
Click here for the full list of frequently asked questions.
The attorneys at Hyman Cotter PC include former senior attorneys at the SEC whose legal experience and industry knowledge make them uniquely qualified to provide counsel on securities regulatory, compliance and enforcement matters. When it comes to regulatory compliance and enforcement matters, our attorneys have dealt with investigations and enforcement actions stemming from allegations including violations of SEC, FINRA, and SRO rules and regulations. If your firm is facing an investigation from a regulatory agency, please contact Hyman Cotter PC at 312-291-4600 or through our online contact form.
