Quick Answer
Communications fall into three categories by audience: correspondence (25 or fewer retail investors in any 30 calendar-day period), retail communications (more than 25 retail investors in that same window), and institutional communications (institutional investors only). The category a piece falls into drives its approval, filing, and recordkeeping treatment throughout this unit.
Counting is the hard part. The same email is correspondence at 25 retail investors and a retail communication at 26, and the 30-day window rolls, so one piece can change category without a word of it changing.
What Are the Three Communication Categories?
| Category | Distributed or made available to | Audience threshold |
|---|---|---|
| Correspondence | Retail investors | 25 or fewer within any 30 calendar-day period |
| Retail communication | Retail investors | More than 25 within any 30 calendar-day period |
| Institutional communication | Only institutional investors (excludes a firm's own internal communications) | No retail-investor threshold; institutional investors only |
A retail investor is any person other than an institutional investor, regardless of whether that person has an account with the representative's firm.
Exam Tip: Gotchas
- The line between correspondence and a retail communication is exactly 25 recipients within 30 calendar days. The same piece sent to a 26th retail investor within that window becomes a retail communication, which carries a stricter approval standard than correspondence.
- The 30-day window is a rolling one, not a calendar month. Count back 30 calendar days from today, not from the first of the month.
Who Counts as an Institutional Investor?
Institutional-investor status is a closed list. A person or entity qualifies only if it fits one of these categories:
- A bank, savings and loan association, insurance company, or registered investment company; an investment adviser registered with the SEC or a state securities commission (or any agency or office performing like functions); or any other person, including a natural person, with total assets of at least $50 million.
- A governmental entity or a subdivision of one.
- An employee benefit plan that meets the requirements for a 403(b) or 457 retirement plan (or multiple such plans of the same employer), with at least 100 participants in the aggregate. Those two plan types are the whole category, not examples of it. The individual participants in that plan are not institutional investors on their own.
- Another type of qualified retirement plan that meets the same 100-participant aggregate threshold, under the same individual-participant exclusion.
- A member firm, a registered person of a member firm, or a person acting solely on behalf of an institutional investor.
Exam Tip: Gotchas
- A firm may not treat a communication as institutional if it has reason to believe the communication, or any excerpt of it, will be forwarded or made available to a retail investor. The test is what the firm had reason to believe when it distributed the piece, not what happened afterwards. A leak the firm had no reason to expect does not reclassify the piece after the fact.
- Being a plan participant does not make you an institutional investor, even though the plan itself qualifies. The 100-participant threshold belongs to the plan, not to any one person in it.
- A natural person reaches institutional status through the $50 million total-assets test, or by being a registered person of a member firm, or a person acting solely on behalf of an institutional investor. There is no lower asset threshold and no income test in the asset-test category.
What Should You Check on Exam Day?
- Confirm you are counting the recipient window correctly: 25 or fewer retail investors in any rolling 30 calendar-day period is correspondence, and one more retail investor in that window flips it to a retail communication.
- Check whether the scenario names an institutional-investor category directly (bank, $50 million natural person, governmental entity, qualifying retirement plan) or describes facts that only imply one.
- Watch for an institutional piece an excerpt of which is later forwarded to a retail investor. Ask what the firm had reason to believe when it distributed the piece; an unexpected leak does not reclassify it.