Communications with the Public

Which category a piece falls into decides who approves it, whether it gets filed, and what the record must hold.

Which One-Liners Win Points?

• Correspondence is 25 or fewer retail investors in any rolling 30 calendar-day period. A 26th retail investor in that window turns the same piece into a retail communication, unchanged.
• Institutional status is a closed list: banks, insurance companies, registered investment companies and advisers, governmental entities, qualifying retirement plans, member firms and their registered persons, and anyone meeting the total-assets test. Everyone else is a retail investor, account with the firm or not.
• Content standards apply to all three categories. Fair dealing and good faith, fair and balanced, a sound basis for evaluation, no material omission, and no false, exaggerated, unwarranted, promissory, or misleading claim.
• Predicting or projecting performance is barred, with three carve-outs: a hypothetical illustration of mathematical principles, a compliant investment-analysis tool or its written report, and a supported research-report price target.
• An appropriately qualified registered principal must approve each retail communication before the earlier of its use or its filing with the Financial Industry Regulatory Authority (FINRA) Advertising Regulation Department.
• Correspondence and institutional communications run on written supervisory procedures instead, which must add training, documentation of it, and surveillance wherever the firm does not review every institutional piece before first use.
• A private offering generally cannot be advertised like a registered one: public advertising is incompatible with the no-solicitation private placement exemption. The accredited-only exemption is the exception.

Which Numbers Matter Most?

Which Gotchas Trip Students Up?

Exam Tip: Gotchas

• Excluded from filing is not excluded from the content standards. A private placement memorandum is never filed with the Department, must still be fair and balanced, and can still be called in under the Department's spot-check procedure.
• A plan participant is not an institutional investor, even where the plan itself qualifies. The 100-participant threshold belongs to the plan, not to any one person in it.
• The institutional test is what the firm had reason to believe when it distributed the piece. An unexpected forward to a retail investor does not reclassify it afterwards.
• A tombstone-style announcement of participation in a private placement is excluded from filing. That is not permission to market the offering broadly, and the exclusion drops away for a publicly offered direct participation program or registered-investment-company securities.
• The record does not always name an approving principal. Where none approved a piece before first use, it names whoever prepared or distributed it, and it always sources any statistical illustration.

One-Breath Recap

Communications split three ways by audience: correspondence reaches 25 or fewer retail investors in any rolling 30 calendar-day period, a retail communication reaches more, and an institutional communication reaches institutional investors only. A registered principal approves each retail communication before the earlier of its use or its filing, while the other two categories run on written supervisory procedures. The content standards and the three-year retention rule, first two years easily accessible, reach all three alike. Excluded from filing never means excluded from those standards, and a private offering cannot be advertised like a registered one unless the accredited-only exemption applies.

Need more than the recap? Read the full Communications with the Public unit.