Standards and Required Approvals
Now that you know how to classify communications, the next question is: what rules apply to each type? Every communication must meet certain content standards, but the approval and filing requirements differ significantly by category.
Content Standards (All Communications)
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, Rule 2210 content standards apply).
The overarching principle is fair and balanced. If a communication highlights potential gains, it must also discuss risks.
Principal Approval and Filing Requirements
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).
FINRA Filing Requirements
New Members (First Year)
- 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
Established Members
- Certain retail communications must be filed within 10 business days of first use (post-use filing)
- Categories requiring filing include:
- Mutual funds and ETFs
- Variable contracts (annuities and life insurance)
- Structured products
- Performance rankings
| 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.
Recordkeeping
Members must maintain records of all retail and institutional communications, including:
- Dates of first and last use
- Name of the approving principal
- Date of approval
This requirement comes from Securities Exchange Act (SEA) Rule 17a-4 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.