Communications with the Public

The three categories

Correspondence is any written communication, including electronic, distributed or made available to 25 or fewer retail investors within any 30 calendar-day period.

A retail communication is any written communication distributed or made available to more than 25 retail investors within any 30 calendar-day period.

An institutional communication is any written communication distributed or made available only to institutional investors, and does not include a member's internal communications.

The boundary is exactly 25. An email sent to 25 retail investors is correspondence; the same email sent to 26 is a retail communication with a different approval regime attached. A representative sending a market commentary to a client list needs to know which side of that line they are on.

A retail investor is any person other than an institutional investor, whether or not they have an account with the firm — so a prospect counts.

Institutional investors include banks, savings and loan institutions, insurance companies, registered investment companies, registered investment advisers, other entities or natural persons with total assets of at least $50 million, government entities, employee benefit plans meeting size thresholds, FINRA members and their associated persons.

One trap: a communication is treated as a retail communication if the firm has reason to believe it will be forwarded to retail investors. Sending something to an institution that will pass it on to its retail clients does not make it institutional.

Approval, filing and retention

Correspondence requires supervision and review under the firm's supervisory procedures in Rule 3110, but not pre-approval by a principal. Firms typically use surveillance and sampling rather than reading every email.

Retail communications must be approved by an appropriately qualified registered principal before the earlier of use or filing with FINRA, subject to limited exceptions — including certain research reports covered by other rules, communications posted in an online interactive forum, and communications that do not make a financial or investment recommendation and do not promote a product or service of the member.

Institutional communications require written procedures for review by a qualified principal, and the procedures may rely on staff education and surveillance rather than pre-use review of every item.

Filing divides into pre-filing and post-filing, both measured in ten business days.

Filed at least 10 business days before first use: retail communications of a new member during its first year of FINRA membership; retail communications concerning security futures; and retail communications containing investment company performance rankings or comparisons not generated by the investment company itself.

Filed within 10 business days of first use: retail communications concerning registered investment companies, direct participation programs, collateralized mortgage obligations, and derivative products such as options and structured products referencing securities, baskets, indexes, commodities or currencies.

Institutional communications and correspondence are not filed at all.

Records of retail and institutional communications must be retained under SEC Rule 17a-4(b), together with the name of the person who prepared or approved them, the date of approval, the source of any statistical data, and any FINRA review letters.

Content standards

The general standard is that all communications must be fair and balanced, provide a sound basis for evaluating the facts about any security or service, and not omit any material fact whose omission would make the communication misleading.

What is prohibited:

False, exaggerated, unwarranted, promissory or misleading statements or claims.

Predictions or projections of investment performance, with defined exceptions — a hypothetical illustration of mathematical principles that does not predict or project the performance of an investment, an investment analysis tool meeting Rule 2214, and, under the 2023 amendments, certain projections of performance and targeted returns provided only to institutional investors and qualified purchasers under specified conditions.

Claims that are not accompanied by the disclosure a reader needs to evaluate them — a performance figure without the period, the assumptions, and the fees.

Comparisons that omit material differences between the things compared. Comparing a CMO to a CD, as lesson 3.6 covered, is prohibited outright by Rule 2216.

Statements implying that FINRA or the SEC endorses a member, a communication or a security.

Testimonials must disclose whether the person was compensated and that their experience may not be representative of other customers'. A testimonial about technical advice from someone not qualified to give it must disclose that too.

And communications must prominently disclose the member's name, so the reader knows who is speaking.

One broader point that connects to the whole course: the standard is fair and balanced, not merely accurate. A communication containing only true statements can violate the rule by omission — presenting a product's yield without its risk, or its tax exemption without the alternative minimum tax consequence.

The product-specific rules

Layered on top of Rule 2210 are rules for products where the general standard proved insufficient. Their existence is a map of where mis-selling happened.

Rule 2211 covers communications about variable life insurance and variable annuities, requiring balanced treatment of the insurance and investment components and prohibiting the implication that a variable contract is a short-term liquid investment.

Rule 2212 covers the use of investment company rankings in retail communications, requiring that a ranking be from a recognized ranking entity, disclose the category and number of funds in it, and cover a specified set of periods.

Rule 2213 covers bond mutual fund volatility ratings, which may be used only in narrow circumstances with prescribed disclosure.

Rule 2214 covers investment analysis tools, permitting a tool that produces simulations provided prescribed disclosure accompanies it and the tool is filed with FINRA.

Rule 2216 covers collateralized mortgage obligations, discussed in lesson 3.6.

Rule 2220 covers options communications, requiring that they be preceded or accompanied by the options disclosure document and approved by a Registered Options Principal, and prohibiting projections of performance. Educational material meeting the rule's conditions may be distributed without the ODD.

On the municipal side, MSRB Rule G-21 covers advertising by municipal securities dealers, applying an equivalent standard with its own approval requirements.

The practical instruction for a representative is narrow and important: anything you write to more than 25 retail investors is a retail communication, needs principal approval before it goes out, and may need to be filed. That includes a market commentary, a newsletter, a seminar handout and a social media post. Personal social media used to discuss the firm's business is not a private matter; it is a communication subject to these rules and to the firm's retention obligations.