11. Communications w the Public Flashcards
True / false: if a BD offers an investment analysis tool to retail clients, FINRA must be given access to that tool upon request
What about for institutional investors?
True
Access in case of institutional investors not required
When evaluating CMO products, prepayment and extension risk can be characterized as a ________ disclosure
”life of loan” disclosure
Retail communications and correspondence regarding CMOs must disclose…(6 items)
1) coupon rate
2) anticipated yield / average life
3) specific tranche - number & class
4) final maturity date
5) underlying collateral
6) special statement that “yield and average life shown above” may be different based on prepayments / market conditions
For retail communications regarding mutual funds that include performance rankings, the ranking must cover a minimum period of ________
one year
Under what circumstances can investment rankings in retail communications be used?
If rankings are created by INDEPENDENT ranking entities (eg Morningstar)
OR
Firms may use their own rankings, provided they are based on the performance measurements of an INDEPENDENT ranking entity
In retail communications, rankings that cover a period of _______ are prohibited, unless the ranking is based on the SEC standardized yield formula
less than one year
If a fund has been in existence for at least 1 year, rankings based on total return must be based on _______
a one year period
If a fund has been in existence for at least 5 years, rankings based on total return must be based on _______
a one AND five year periods
If a fund has been in existence for at least 10 years, rankings based on total return must be based on _______
a five AND ten year period
Eg a 12 year old fund that was average for 9 years, but excellent for the last 3, must still use a 10 year period for total return since it was in existence for at least 10 years
true / false: a RR is permitted to use an illustration to demonstrate the potential return of a variable product
true
HOWEVER a RR may NOT imply that the growth rate used is assured or a minimum guarantee.
The RR may use a rate as high as 12% if the client is also shown a 0% growth scenario
Re televised communications, if a draft version (story board) of a video recording or a TV commercial has been filed, a final filmed version must be filled with FINRA within ___________ of its first use
10 business days
True / false: liking (on social media) UNAPPROVED content (including from a third party) is not subject to any restrictions
False - liking unapproved content makes it “adoption” and subject to FINA rules for communication, supervision and recordkeeping
Liking PRE-APPROVED social media produced by a firm is OK
True / false: legal protections exist for companies that use forward-looking statements (“expects”, “believes” etc) if certain criteria for their use are met
true
A Retail Communication is defined as being distributed to ______ retail clients inside of a ____ period
> 25 (26 or more) clients
30 day period
True / false: RP pre-approval is required for all RETAIL COMMUNICATIONS
true (with very limited exceptions)
In Retail Communications, FINRA pre-approval is needed for these types (3 types) of communications and require notice _____ business days prior to distribution
Types:
1) new firms (less than one year) public media (website, radio, TV, billboard)
2) investment companies w PRIVATE (non-independent) rankings
3) security futures
Length of notice:
10 business days
In Retail Communications, FINRA POST-approval is needed for these types (3 main types) of communications and require notice _____ business days after distribution
Types:
1) investment company communications that aren’t pre-filed (e.g mutual funds using independent rankings)
2) DPPs (limited p’ships)
3) CMOs
Length of notice:
10 business days post distribution
A Retail Correspondence is defined as being distributed to ______ retail clients inside of a ______ period
25 or fewer
30 day period
True / false: a registered principal needs to pre-approve Retail Correspondence prior to distribution
false
Only spot check flow
Is either pre-approval or post-approval required by FINRA for Retail Correspondence?
no - neither is required
Is either pre-approval or post-approval required by FINRA for Institutional client communications?
no - neither is required
True/false: In communications, retail customers with >$50mm in assets are treated the same as Institutional
true
In public communications Static Content is defined as _______ (e.g., __________) and is treated as ________
Defined as fixed and rarely changed
E.g., website copy, information posted on a Facebook wall or profile, or blog posts
Treated as Retail Communications (RP pre-approval and FINRA pre-approval 10 biz days prior)
In public communications Interactive Content is defined as _______ (e.g., _________) and is treated as ___________
Defined as dynamic, real-time communications
E.g., tweets, Facebook comments, or responses to comments on a blog post
Treated as Retail Correspondence (RP pre-approval NOT required; FINRA approval (pre or post) NOT required)
