Correspondence and Advertising

The whole unit on one sheet: FINRA's categories, the Administrator's filing power, the two prohibited representations, the digital rules, and books and records.

How Does FINRA Classify Communications?

• Every written or electronic communication falls into one of three categories by audience: retail communication (more than 25 retail investors in 30 days), correspondence (25 or fewer), and institutional communication (institutional investors only).
• General content standards are universal: fair and balanced, no false or exaggerated claims, balanced treatment of risks and benefits, with no exception for correspondence or institutional communications. Two standards are narrower: member-name identification skips institutional communications, and recommendation-related financial-interest disclosure applies to retail communications only.
• Only retail communications need prior principal approval. Correspondence and institutional communications get supervision and written procedures instead.
• Filing with FINRA falls mainly on retail communications. New members file before use (10 business days); established members generally file certain products after use (10 business days).
• Social media: static content (pre-written posts, bios) is a retail communication needing prior approval; interactive content (live chat, real-time replies) may use correspondence-style supervision.

What Is the Administrator's Filing Authority?

• The state Administrator may, by rule or order, require filing of any prospectus, pamphlet, circular, form letter, advertisement, or other sales literature aimed at prospective investors.
• Timing is the Administrator's choice: before use, concurrently with use, or after use.
• The power is discretionary ("may"), not automatic, and it does not apply to exempt securities or transactions, or to federal covered securities.

Which One-Liners Win Points?

• The correct word is "effective," never "approved," "endorsed," or "recommended." A fully registered security can still trigger an unlawful representation.
• Both facts carry both consequences. Neither filing an application nor effective registration is a finding that any document is true, complete, and not misleading, and neither fact, nor an available exemption, means the Administrator passed on the merits.
• Guaranteeing a customer against loss in any account or transaction is absolutely prohibited for broker-dealers and agents alike, and a verbal guarantee counts.
• An agent may share in a customer's profits or losses only with written authorization from both the customer and the firm. That pair is the whole state-law test; proportional sharing is a FINRA overlay.
• Advertising may not be deceptive or misleading, use nonfactual or conjectural data, or undermine a prospectus. Quoting bid or asked prices the firm does not believe are bona fide is a dishonest practice, and false statements in any document filed with the Administrator are unlawful.

Which Gotchas Trip Students Up?

• Static content the firm posts and controls is the firm's own communication, treated as advertising and falling within the Administrator's filing authority. Being online does not put it outside, though the filing power stays discretionary.
• Interactive content turns on supervision, and responsibility for outside content depends on adoption and entanglement.
• Adoption or entanglement makes third-party posts yours: liking, sharing, endorsing, or adding commentary makes the firm responsible, misleading content included. A plain hyperlink for general reference does not.
• "It's just our website" is not a defense, and there is no exemption for informal channels: texts, instant messages, and social posts carry the same supervision and retention duties as a formal letter.
• Predicting or projecting future performance, or implying past results will recur, can violate the antifraud provisions even without a formal guarantee.

What Do the Books and Records Rules Require?

• One SEC rule lists what a broker-dealer must create; a companion rule sets how long to keep each type.
• 6 years (first 2 easily accessible): blotters, ledgers, account-opening and maintenance records. 3 years (first 2 easily accessible): order memoranda, confirmations, account statements, communications with the public. 4 years: written complaints under the FINRA overlay. Life of the enterprise: partnership articles, corporate charter, minute books, stock-certificate books.
• FINRA's customer-account-information rule requires 6-year retention of account data after it is updated, or after the account closes if never updated.
• Correspondence is retained in full; only its supervisory review may use risk-based sampling.
• A state Administrator can examine records for federal-standard compliance but cannot invent a state-only recordkeeping requirement.

Which Numbers Matter Most?

One-Breath Recap

FINRA classifies communications as retail, correspondence, or institutional by audience size, holds all three to the same fair-and-balanced content standard, and requires prior principal approval only for retail communications. The Administrator may separately require filing of any sales literature before, during, or after use, though exempt securities, exempt transactions, and federal covered securities fall outside that authority. Registration is procedural and never approval, so "effective," "registered," and "filed" are the accurate words while "approved," "endorsed," or "recommended" is unlawful, even for a fully registered security. Guaranteeing a customer against loss is absolutely prohibited for broker-dealers and agents alike, and profit-sharing needs written consent from both the customer and the firm. Every electronic channel must be supervised and retained, and records run mostly 3 or 6 years.

Need more than the recap? Read the full Correspondence and Advertising unit.