Correspondence and Advertising

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

How Does FINRA Classify Communications?

• External written communications are retail (more than 25 retail investors in 30 days), correspondence (25 or fewer), or institutional (institutional investors only); internal firm messages are excluded.
• 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. Examples of narrower standards: member-name identification skips institutional communications, and recommendation-related financial-interest disclosure applies to retail communications only.
• Retail communications generally need prior principal approval. Prior-use exceptions cover unchanged previously reviewed material, qualifying research-related communications, online interactive forums, and nonpromotional communications. Correspondence and institutional communications get supervision and written procedures instead, and a FINRA filing always needs principal approval first.
• 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 generally a retail communication needing prior approval, subject to the prior-use exceptions; 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?

• Stating that registration is effective must not imply state endorsement, recommendation, or merit review. Even a registered security can be the subject of 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 content yours: sharing or directly linking to a specific article adopts it, and endorsement or preparation can add adoption or entanglement. A continuously available independent-site link can avoid adoption when the firm has no influence or control.
• "It's just our website" is not a defense. Firm-business texts, instant messages, and social posts carry the same supervision and retention duties as a formal letter. A purely personal message is not covered merely because it used an electronic channel.
• 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.
• Keep the clocks separate: blotters and ledgers use 6 years, first 2 easily accessible; order memoranda, confirmations, statements, and communications use 3 years, first 2 easily accessible. Account cards and information have separate clocks below.
• FINRA's account-information rule keeps superseded data 6 years after each update, and the last version 6 years after closing.
• 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 external written communications as retail, correspondence, or institutional; internal messages are excluded. All three share the general content standards. Retail communications generally need prior approval, except unchanged reviewed material, qualifying research, online interactive forums, and nonpromotional communications; FINRA filing always needs prior approval. The Administrator may separately require sales-literature filing, except for exempt securities or transactions and federal covered securities. Registration is never approval. Loss guarantees are prohibited, profit-sharing needs both written consents, and firm-business electronic messages need supervision and retention.

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