Quick Answer
Every written or electronic communication from a broker-dealer falls into one of three categories: retail communication, institutional communication, or correspondence. The category depends on audience size and type, and it determines who must approve the communication and when it must be filed with FINRA.
Getting this classification right is the foundation for everything else in this unit: it decides who reviews the piece, when it must be filed, and how closely it is supervised.
What Are the Three Communication Categories?
The communications-with-the-public rule classifies all written (including electronic) communications into three categories based on audience size and type:
| Category | Definition | Audience | Key Threshold |
|---|---|---|---|
| Retail communication | Distributed or made available to more than 25 retail investors within any 30 calendar-day period | General public, retail customers | > 25 retail investors in 30 days |
| Institutional communication | Distributed or made available only to institutional investors | Banks, insurance companies, registered investment companies, investment advisers, entities with $50M+ in assets | Institutional investors only |
| Correspondence | Distributed or made available to 25 or fewer retail investors within any 30 calendar-day period | Small group of retail customers | 25 or fewer retail investors in 30 days |
For a mixed audience, count only retail investors toward the 25-investor threshold. A written communication sent to 1 retail investor and 30 institutional investors is correspondence, assuming no additional retail distribution within the rolling 30-calendar-day period. The institutional recipients do not increase the retail count.
A retail investor is any person other than an institutional investor. A firm's internal communications fall outside all three categories. The rule writes that carve-out into one place only: the definition of an institutional communication.
Exam Tip: Gotchas
- The 25-person count uses a rolling 30-calendar-day period, not per mailing. If you send an email to 26 retail customers over 30 days, it is a retail communication, even if you sent them one at a time.
- Internal communications are NOT correspondence. They sit outside all three categories. The written carve-out lives in the institutional-communication definition, so that is where the exam asks about it: a firm cannot label an internal piece an institutional communication.
- An email blast to a firm's entire client list is almost always a retail communication.
Who Counts as an Institutional Investor?
An institutional investor under the communications-with-the-public rule includes:
- Banks, savings institutions, and insurance companies
- Registered investment companies (mutual funds)
- Registered investment advisers
- Any person (natural or entity) with total assets of at least $50 million
- Government entities
- Employee benefit plans meeting certain size requirements
- FINRA member firms and registered associated persons
A member cannot treat material as an institutional communication if it has reason to believe the communication, or an excerpt of it, will be forwarded or made available to a retail investor.
Exam Tip: Gotchas
- A high-net-worth individual with $50 million in total assets qualifies as institutional under this rule, even though the person is not a bank or a fund. The exam may test whether a wealthy individual's communications count as institutional or retail.
- Labeling material "institutional" does not make it institutional. If the firm has reason to believe it will reach a retail investor, institutional-only treatment is unavailable. Then apply the retail-recipient count: 25 or fewer in 30 calendar days is correspondence; more than 25 is retail communication.
What Is a Public Appearance?
Public appearances are a separate category from the three written communication types. They include:
- Seminars and forums
- Radio or television interviews
- Other unscripted public speaking activities
If an associated person recommends a security during a public appearance, the person must:
- Have a reasonable basis for the recommendation
- Disclose any non-nominal financial interest in the securities of the issuer and the nature of that interest
- Disclose any other actual, material conflict of interest of the person or firm that the person knows or has reason to know at the time of the appearance
Those two disclosure duties (financial interest and conflict of interest) do not apply to a research analyst's public appearance that already includes the separate research disclosures, or to a recommendation of only investment-company securities or variable insurance products; the reasonable-basis requirement still applies.
What About an Online Chat Room or Forum?
An online chat room is an interactive electronic forum. How the rule treats a post depends on whether the post is prepared or unscripted:
| What the representative does | Category | Pre-use principal approval |
|---|---|---|
| Takes part in the discussion in real time, with unscripted replies | Public appearance | Not required; the firm reviews it under its written supervisory procedures |
| Posts a prepared written piece (for example, a research summary) that more than 25 retail investors can read within 30 days | Retail communication | Not required if the firm supervises and reviews it like correspondence; it is also excluded from FINRA filing |
| Posts a static item, such as a profile or banner that promotes the firm | Retail communication | Required, because it is not an interactive forum post |
The number of members decides the audience count. A prepared post visible to 200 retail members is made available to more than 25 retail investors, so it is a retail communication.
Exam Tip: Gotchas
- A scripted seminar presentation shown to more than 25 retail investors is a retail communication (not a public appearance) and requires principal pre-approval. Only unscripted public speaking qualifies as a public appearance.
- A chat room is not automatically a public appearance. Unscripted, real-time participation is a public appearance. A prepared written post is a retail communication that is excepted from pre-approval, not reclassified.
- "Written" does not mean "not a public appearance" by itself. Scripted or unscripted is the test for a forum, not spoken or typed.
How Do You Classify a Communication on Exam Day?
Use this decision tree when the exam asks you to classify a communication:
- Is it written or electronic?
- No (unscripted speaking): Public appearance
- Yes: Continue to step 2
- Is it available only to institutional investors?
- Yes: Institutional communication
- No: Continue to step 3
- Will more than 25 retail investors receive it within 30 days?
- Yes: Retail communication
- No: Correspondence
What Should You Check on Exam Day?
- Count retail investors over the rolling 30-calendar-day window, not per mailing.
- Confirm whether a wealthy individual meets the $50 million institutional threshold before classifying by audience type.
- Check whether public speaking or a chat-room post is scripted (retail communication when more than 25 retail investors can see it) or unscripted real-time participation (public appearance).
- Remember internal communications are excluded from all three categories, not treated as correspondence.
- Reject an "institutional" label if the firm has reason to believe the material will reach a retail investor.