Welcome to Communications with the Public: the rules that govern everything a private securities offerings representative writes, says, or hands to a prospect before a single dollar changes hands.
Exam Weight: 3 scored items within Function 1 (25 items / 50% of exam)
What You'll Learn
In this unit, you'll cover:
- The Three Communication Categories: How correspondence, retail communications, and institutional communications are defined by audience size and type, and who counts as an institutional investor
- Content Standards for All Communications: The fair-dealing, balance, and no-misleading-statement standards every communication must meet, plus the limits on predicting performance
- Principal Approval Requirements: When a registered principal must sign off on a communication before it goes out, and how that requirement differs by category
- Filing with FINRA's Advertising Regulation Department: Which communications must be filed, on what timeline, and which categories are excluded from filing
- Recordkeeping Requirements: How long communications must be retained and what the retained record must contain
- Marketing Limits: Private vs. Public Offerings: Why a private offering generally cannot be advertised the way a registered offering can, even when a narrow filing exclusion applies, and which exemption is the exception
Why This Matters
A private securities offerings representative spends most of a working day producing exactly the kind of material this unit governs: pitch materials, term sheets, cover emails, and calls to prospective investors.
- Getting the communication category wrong changes who has to approve the piece and whether it has to be filed at all.
- The line between a compliant private-placement announcement and unlawful general marketing of an exempt offering is one of the more heavily tested traps in this function.
- These rules apply on top of, not instead of, the offering-exemption rules covered later in this chapter.
Let's start with the three communication categories, since every other rule in this unit depends on which category a piece falls into.