UNIT 05.01-002 Flashcards
Filing at least 10 business days before first use is required for which of the following?
Mutual fund advertisements placed by a broker-dealer that became a member of FINRA 7 months ago
All retail communications prepared by members within their first year of registration must be filed 10 business days before first use. For established firms, retail communications dealing with investment companies and variable products are generally required to be filed within 10 business days of first use.
A broker dealer’s website is which type of communication?
Retail communication
Websites, whether sponsored by the company itself or set up by an individual registered representative, are considered retail communications and are subject to applicable filing and recordkeeping rules. They must be reviewed and approved by a principal before first use and must contain no exaggerated claims or misleading information.
Filing with FINRA is required for mutual fund–related
retail communication.
Filing with FINRA is required only for retail communication. The other items are not filed, although they are subject to spot-checking requirements.
A registered representative at your firm made a public appearance that was not subject to the rules of conduct regarding public appearances. Which of the following might it have been?
Announcement on television that your firm’s offices have moved
The television appearance did not involve mention of securities. The others all fit into the definition of public appearance and are required to meet the same standards as other communications with the public.
Your firm has prepared some institutional sales material on several of the securities it deals in and has provided it to three mutual funds. One of the fund managers calls your firm to ask for some extra copies of the material, because he would like to send it to some of his investor friends. This request
may not be complied with if your firm wishes to continue to treat the material as institutional communications.
Institutional communication is just that: institutional. A member firm may not distribute such material to anyone who is not an institutional investor and may not treat material as institutional if the firm has reason to believe that it will be, or has been, forwarded to anyone who is not an institutional investor.
There are retention requirements for certain records of a broker-dealer. One of those is the firm’s retail communications files. Under FINRA rules, copies of retail communications must be retained for
3 years after last use.
Although the file must be started from the date of first use, the 3 years’ record retention requirement begins from the date of final use of the piece.
Correspondence—one of the three categories of communication with the public—is defined as
any written or electronic communication that is distributed or made available to 25 or fewer retail investors within any 30-calendar-day period.
Correspondence can be written or electronic and targeted at either a broker- dealer’s account holders or non-account holders. The criteria that makes communication a correspondence is that it is distributed to 25 or fewer retail customers within any 30-calendar-day period.
A registered representative has been doing some research on his own. He would like to share the information with some of his clients and sends an email to 15 of them. He also has some prospects he’s been working on and sends the email to 12 of them during the same week. Under the FINRA rule on communications with the public, this would be considered
retail communication.
FINRA defines a retail communication as “any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30-calendar-day period.” It is important to understand that retail investors includes current and prospective customers. Because this report will be sent to 27 within the 30-calendar-day period, it fits the definition. Like virtually all retail communications, principal approval is necessary before it is used. Is this an electronic communication? Yes it is, but the exam will want the more specific response—retail communication.
Communications with the public include all of the following except
A) institutional sales material.
B) informational material on a new mutual fund intended for sales personnel.
C) television appearances by an officer of the firm.
D) independently prepared reprints forwarded to your firm’s customers.
B) informational material on a new mutual fund intended for sales personnel.
Material intended for internal use only is not considered a communication with the public.
TRUE
A) institutional sales material.
C) television appearances by an officer of the firm.
D) independently prepared reprints forwarded to your firm’s customers.
FINRA Rule 2210, communications with the public, describes several different categories of communications. One of those categories is called
correspondence.
The three categories of communications with the public are correspondence, institutional communications, and retail communications. The other choices shown here may fit into one of those categories but are not a distinctive category in the rule.
