Chapter 3 - Communications with the Public

Question 1

Retail communications

Answer 1

any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period.

Question 2

Correspondence

Answer 2

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

Question 3

Institutional communications

Answer 3

any written (including electronic) communication that is distributed or made available only to institutional investors, but does not include a member’s internal communications (e.g., internal memos)

Question 4

Min assets to qualify as an institution

Answer 4

Institution - Any entity with $50 million or more of total assets

Question 5

To qualify as an institution, an employee benefit plan must have how many participants ?

Answer 5

Employee benefit plan with at least 100 participants

Question 6

Retail communications related to CMOs must be filed ?

Answer 6

must be filed with FINRA within 10 days of first use (postfiling).

Question 7

What must occur prior to retail communication is filed with FINRA’s Advertising Regulation Department ?

Answer 7

An appropriately qualified registered principal of the member must approve each retail communication before the earlier of its use or filing with FINRA’s Advertising Regulation Department

Question 8

Must member firms review correspondence ?

Answer 8

Member firms that do not review correspondence in advance must have written procedures in place providing for the education and training of their representatives as to FINRA rules on public communications and document this training in writing.

Question 9

The requirement of prior principal approval generally will not apply with regard to….

Answer 9

Any retail communication that is posted on an online interactive electronic forum, and any retail communication that does not make any financial or investment recommendation or otherwise promote a product or service of the member.

Question 11

Exception to retail investor

Answer 11

Note that the term “retail investor” refers to any customer, existing or prospective, that does not fit into the definition of institutional client. With the exception of individuals who have total assets of at least $50 million, all individual investors are considered retail customers.

Question 12

Retail communications recordkeeping requirement

Answer 12

To comply with all recordkeeping requirements, communications should be retained for at least three years in a format and media that complies with regulations, and for the first two years be in a readily accessible location. The file must include the name of the principal who approved the communication and the date approval was given.

Question 13

With regard to retail communication relating to options and security futures….

Answer 13

The member must file copies with FINRA at least 10 days before first use (prefiling). Firms have twomethods of filing with FINRA’s Advertising Regulation Department: (1) electronically using aweb-based filing system, or (2) in hard copy. The web-based system for filing materials is calledAdvertising Regulation Electronic Files (AREF).

Question 14

Retail communications requirement for member firms in their first year of operation.

Answer 14

For a period of one year beginning on the date reflected in the Central Registration Depository (CRD®) system as the date that FINRA membership became effective, the member must file with the department at least 10 business days prior to first use any retail communication that is published or used in any electronic or other public media.

Question 15

All retail communication for investment companies that include a ranking or comparison that is generally not published, must be filed….

Answer 15

All retail communication for investment companies that include a ranking or comparison that is generally not published, or is the creation of the investment company or the member, must be filed at least 10 business days before first use.

Question 16

All retail communication for investment companies that include a ranking or comparison that is generally published or is the creation of an independent entity, must be filed….

Answer 16

within 10 days of first use [postfiling]

Question 17

All retail communication for investment companies that contain bond fund volatility rating must be

Answer 17

prefiled

Question 18

All filings with FINRA’s Advertising Regulation Department must include the following:

Answer 18

TAKE NOTE !!!

All filings with FINRA’s Advertising Regulation Department must include the actual or anticipated date of first use, the name and title of the principal who approvedthe retail communication, and the date the approval was given.

Question 19

Do prospectuses, preliminary prospectuses, tombstones, offering circulars, and similar documents used in connection with an offering of securities filed with the SEC require filing ?

Answer 19

No

Question 20

Public appearance

Answer 20

Public appearance is participation in a seminar, webinar, forum, radio or television interview, or other public appearance or public speaking activity.

Question 21

If an associated person recommends a security in a public appearance,

Answer 21

The associated person must have a reasonable basis for the recommendation. The associated person also must disclose any conflicts of interest that may exist, such as having a financial interest in any security being recommended.

Question 22

Independently prepared reprints require preuse approval…

Answer 22

Independently prepared reprints require preuse approval by a principal to ensure accuracy of the reprint but are not subject to any filing requirements with FINRA.

Question 23

The member firm may alter the contents of an independently prepared reprint only to correct factual errors or to make the article consistent with regulatory standards. True or False

Answer 23

True

Question 24

Instant messaging is an electronic form of communication with the public that can fit into…

Answer 24

If falling within the numerical limits previously described, it can be considered correspondence. If not, it will be retail communication. The difference is that correspondence does not require prior principal approval, while retail communication does.

Question 25

The use of FINRA on a business card or letterhead must be in a smaller type size than that used in the member’s name (T/F) ?

Answer 25

True

Question 26

Can a member pay a fee to a person for a testimonial or endorsement ?

Answer 26

If the member firm paid a fee to the person for the testimonial or endorsement that had a value in excess of $100, it must be disclosed that it is a paid testimonial.

Question 27

Can a public communication make any reference to membership in FINRA or anyother SRO that would imply endorsement or approval ?

Answer 27

Public communication may not make any reference to membership in FINRA or any other SRO that would imply endorsement or approval

Question 28

Do blind recruitment advertising require a member’s name ?

Answer 28

Blind recruitment advertisements (those that direct the reader to forward a resume to an undisclosed employer) are the only form of communication with the public that do not require the member’s name.

Question 29

FINRA considers static blogs as

Answer 29

advertisement

Question 30

If a firm or its associated persons (APs) sponsor a static blog, they must

Answer 30

obtain prior principal approval

Question 31

Blogs that engage in real-time interactive communication with third parties are deemed to be

Answer 31

Blogs that engage in real-time interactive communication with third parties are deemed to be interactive electronic forums by FINRA. In that case, no prior principal approval is required, but it must be supervised

Question 32

Twitter posts are made by a member firm or a representative on its behalf with the public’s participation, the micro-blog would be generally

Answer 32

considered retail communications and subject to principal approval, recordkeeping, and filing requirements

Question 33

For how long does the delivery of educational communication apply to a newly hired registered person ?

Answer 33

The delivery of the communication applies for three months following the date the registered person begins employment or associates with the member.