Advertising, Correspondence, and Social Media

The whole communications unit on one sheet: the Administrator's filing power, the unlawful-representation and performance-guarantee prohibitions, advertising standards, and the digital rules the exam loves.

The Administrator's Filing Authority

• The state Administrator (the state securities regulator) 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 flexible: before use, concurrently with use, or after use. The Administrator picks.
• The power is discretionary ("may"), not automatic. Not every communication must be filed.
• Does not apply to exempt securities/transactions or to federal covered securities (exchange-listed and investment-company securities).

The One-Liners That Win Points

• The correct word is "effective," never "approved," "endorsed," or "recommended." Any substitute word is unlawful.
• A fully registered security can still trigger an unlawful representation. Registration does not equal approval.
• Filing an application does not mean the Administrator found it true, complete, or not misleading. Effective registration does not mean the Administrator passed on the merits.
• An available exemption is also not approval. Exemptions are procedural.
• Guaranteeing a customer against loss in any account or transaction is absolutely prohibited, and a verbal guarantee counts.
• The performance-guarantee ban covers both broker-dealers and agents.
• An agent may share in a customer's profits or losses only with written authorization from both the customer and the firm, and only in proportion to the agent's own contribution.
• Advertising and sales presentations may not be deceptive or misleading, use nonfactual or conjectural data, or undermine a prospectus or disclosure.
• Quoting bid or asked prices the firm does not believe are bona fide is a dishonest practice.
• False or misleading statements in any document filed with the Administrator are unlawful, not just in ads.

Top Gotchas

• Static content the firm posts and controls (homepage, bios, product descriptions) is the firm's own communication, treated as advertising and subject to pre-review, filing, and the not-misleading standard.
• Interactive content (live chat, comment threads) turns on supervision: responsibility for outside content depends on adoption and entanglement.
• Adoption/entanglement makes third-party posts YOURS: "liking," sharing, endorsing, or adding commentary to third-party content makes the firm responsible for it, misleading content included.
• A plain hyperlink for general reference does not automatically constitute adoption, but adding commentary or endorsement does.
• "It's just our website" is not a defense. Website content is a communication, subject to the same antifraud and not-misleading standards as a printed brochure.
• No exemption for informal channels. Text messages, 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.
• Guaranteeing against loss can also be fraud if it is a material misrepresentation in connection with the offer, sale, or purchase of a security.

Numbers to Lock In

• All electronic communications used to conduct securities business (email, text, instant message, social media posts, website content) must be supervised and retained. No channel is exempt.

One-Breath Recap

The Administrator may require filing of any sales literature before, during, or after use, though exempt and federal covered securities are excluded. Registration is a procedural step and never approval, so "effective" is the only safe word and calling a security "approved," "endorsed," or "recommended" is unlawful, even a fully registered one. Guaranteeing a customer against loss is absolutely prohibited for both broker-dealers and agents, verbal promises included, and profit-sharing needs written consent from customer and firm plus proportional contribution. All advertising must be fair and not misleading, and every electronic and social-media communication must be supervised and retained, with static content treated as the firm's own advertising and adoption or entanglement making third-party posts the firm's responsibility.

Need more than the recap? This is a condensed summary. If it is not enough, read the full Advertising, Correspondence, and Social Media unit for the complete lesson.