Quick Answer
Every broker-dealer communication, in any category, must be fair and balanced and free of misleading claims. Approval and filing requirements then diverge by category: retail communications need principal pre-approval and sometimes a FINRA filing; institutional communications and correspondence need written review procedures instead.
The content standards are the same for every category. What changes is who signs off before the communication goes out and whether FINRA sees it.
What Content Standards Apply to Every Communication?
Regardless of category, every broker-dealer communication must:
- Be based on principles of fair dealing and good faith
- Be fair and balanced and provide a sound basis for evaluating the facts
- Not omit any material fact or qualification if the omission would make the communication misleading
- Contain no false, exaggerated, unwarranted, promissory, or misleading statements or claims
- Not predict or project performance or imply that past performance will recur
- Not make any exaggerated or unwarranted claim, opinion, or forecast
These standards apply to retail communications, institutional communications, correspondence, and public appearances alike.
Exam Tip: Gotchas
- Content standards apply to ALL communication types, including public appearances. The exam may present a scenario where a rep makes unbalanced claims during a speech and ask whether any rule was violated (yes, the communications-with-the-public content standards apply).
The overarching principle is fair and balanced. If a communication highlights potential gains, it must also discuss risks.
A firm may not address a customer's mail in care of someone else unless the customer gave written instructions to do so within the past 12 months, or the firm also sends a duplicate copy to another address the customer designated in writing.
How Do Approval and Filing Requirements Differ by Category?
This is where the categories diverge. The exam frequently tests these distinctions:
| Communication Type | Principal Pre-Approval | FINRA Filing | Supervision Requirement |
|---|---|---|---|
| Retail communication | Required before the earlier of use or filing | Certain categories must be filed | Principal must approve before use |
| Institutional communication | Not required before use | Not required (except options pre-Options Disclosure Document) | Firm must establish written review procedures |
| Correspondence | Not required before use | Not required | Firm must have supervisory procedures to review |
| Public appearance | Not required | Not required | Firm must establish written supervisory procedures |
Exam Tip: Gotchas
- Institutional communications do NOT require principal pre-approval, but the firm MUST have written review procedures. The exam tests whether you know the difference between "pre-approval required" (retail only) and "review procedures required" (institutional).
If a firm's institutional review procedures do not require every institutional communication to be reviewed before its first use, the firm must instead provide:
- Education and training for the associated persons who prepare or distribute institutional communications
- Documentation of that training
- Surveillance and follow-up to monitor compliance after the fact
Two categories of retail communication escape the standard pre-approval requirement:
- An unaltered retail communication that another member already filed and received a FINRA consistency letter for may be used without separate principal pre-approval
- Communications that make no recommendation and promote no product or service, including qualifying online interactive forums, may instead be supervised like correspondence
When Must Retail Communications Be Filed With FINRA?
What Applies to New Members?
- Must file retail communications with FINRA's Advertising Regulation Department at least 10 business days before first use
- This is a pre-use filing requirement: the communication cannot be used until 10 business days have passed
- Exception: a free writing prospectus already filed with the SEC may instead be filed within 10 business days after first use, like an established member's post-use filing
What Requires Filing Before Use, Regardless of Membership Status?
Two categories must be filed at least 10 business days before use, and cannot be circulated until any required changes are made:
- Security-futures retail communications
- Unusual investment-company rankings or comparisons
What Applies to Established Members?
- Certain retail communications must be filed within 10 business days of first use (post-use filing)
- Four categories require this filing:
- A communication that promotes or recommends a specific registered investment company or fund family (mutual funds, ETFs, variable insurance products, closed-end funds, and unit investment trusts all count)
- A communication concerning a public direct-participation program
- A communication concerning a registered CMO
- A communication concerning a registered security derived from a single security, basket, index, commodity, debt issuance, or foreign currency, when none of the first three categories applies
| Member Status | Filing Timing | When Material Can Be Used |
|---|---|---|
| New member (first year) | At least 10 business days before first use | After 10-business-day waiting period |
| Established member | Within 10 business days after first use | Immediately after principal approval |
Exam Tip: Gotchas
- New FINRA members must file BEFORE use (10 business days in advance). Established members file AFTER use (within 10 business days). The exam frequently tests this timing distinction.
What Records Must Firms Keep?
Members must maintain records of all retail and institutional communications, including:
- A copy of the communication and the dates of first and last use
- The name of the approving principal and the date of approval
- If a communication was not approved by a principal before first use, the name of the person who prepared or distributed it
- The source of any statistical table, chart, graph, or other illustration used
- For a retail communication filed with FINRA instead of principal-approved, the filing member's name and a copy of FINRA's review letter
- For a communication with a performance ranking or comparison of a registered investment company, a copy of the ranking or performance material used
This requirement comes from broker-dealer recordkeeping rules and applies regardless of whether a FINRA filing is required.
Exam Tip: Gotchas
- Recordkeeping applies to both retail AND institutional communications, not just those filed with FINRA. Even if a communication does not require FINRA filing, the firm must still maintain records of it.
What Should You Check on Exam Day?
- Apply the same fair-and-balanced content standards even to public appearances.
- Distinguish "pre-approval required" (retail only) from "review procedures required" (institutional, correspondence, public appearances).
- Check whether the filer is a new member (files before use) or an established member (files after use).
- Confirm the category actually requires post-use FINRA filing (a specific fund or fund family, a direct-participation program, a CMO, or a derivative security not already covered) before applying the 10-day deadline.
- Remember recordkeeping applies to retail and institutional communications alike, filed or not, and covers more than just the approving principal's name and the dates of use.
- If institutional communications are not reviewed before every first use, confirm the firm still provides training, documentation, and surveillance and follow-up.
- Check for a valid pre-approval exception (a filed consistency letter, or a no-recommendation communication like a qualifying interactive forum) before assuming pre-approval was required.
- Apply the 10-business-day pre-use filing rule to security-futures and unusual ranking communications.