4.4 Correspondence and Internal Communications, Social Media, Public Appearances, and Telemarketing

Reviewing Correspondence and Internal Communications (Rule 3110(b)(4))

The firm's procedures must provide for review of incoming and outgoing written (including electronic) correspondence and internal communications relating to its securities business. The review must be appropriate to the firm's business, size, structure and customers. At a minimum, it must identify and handle:

• customer complaints, including complaints in emails and messages (Section 11.1);
• instructions such as orders and address changes;
• communications involving funds and securities; and
• communications on subjects that FINRA rules or the securities laws require be reviewed, such as recommendations and possible insider trading.

Reviews must be performed by a registered principal and evidenced in writing, on paper or electronically.

Risk-based review (Rule 3110.06). Firms decide by risk which other correspondence needs review. If correspondence is not pre-reviewed, the firm must provide for:

1. training of associated persons on its correspondence procedures;
2. documentation of that training; and
3. surveillance and follow-up to confirm the procedures are followed.

Evidence of review (Rule 3110.07). The record must identify the reviewer, the communication reviewed, the date of review, and actions taken on any significant regulatory issue. Merely opening a communication is not a review.

Delegation (Rule 3110.08). A principal may delegate review functions to unregistered persons, such as lexicon-screening staff, but remains ultimately responsible and must take reasonable steps to ensure the delegated functions are performed.

Retention (Rule 3110.09). Correspondence and internal communications must be kept for the period in SEC Rule 17a-4(b), which is three years, the first two in an easily accessible place. The records must show who prepared and who reviewed outgoing correspondence.

Electronic and Social Media Communications

• Off-channel communications. Business conversations on texting or messaging apps that the firm does not capture and archive violate recordkeeping rules. Beginning in late 2021, the SEC brought a series of large enforcement cases over business messaging on personal devices. Firms must either capture such channels or prohibit and police their business use.
• Social media. Static content, such as profile pages or posted articles, is generally a retail communication requiring principal approval if it promotes products. Real-time interactive posts are supervised like correspondence (Rule 2210(b)(1)(D)). FINRA guidance treats a firm as responsible for third-party content it has adopted, for example by endorsing or sharing it, or become entangled with, for example by helping prepare it.
• Recordkeeping. All business communications must be kept in compliant electronic storage under Rule 17a-4(f) (Section 10.3).

Public Appearances (Rule 2210(f))

A public appearance is an unscripted seminar, forum, radio or television interview, or other speaking activity that is not itself a retail communication, correspondence or institutional communication. In it:

• associated persons must follow the general standards of Rule 2210(d)(1): fair, balanced and not misleading, with no projections;
• a person who recommends a security must have a reasonable basis and disclose any financial interest in the issuer's securities and any other actual, material conflict of interest. For investment company securities and variable insurance products, only the reasonable-basis requirement applies;
• scripts, slides, handouts and invitations are communications subject to Rule 2210 according to their audience. A seminar invitation mailed to 500 people is a retail communication needing principal approval; and
• the firm must have written procedures for supervising public appearances, including training, documentation and surveillance and follow-up.

Free-lunch seminars aimed at retirees draw particular regulatory attention. Principals should review the invitations, slides and speaker's scripts, and the follow-up recommendations, for balance and for any implication of guaranteed income.

Telemarketing (Rule 3230)

Rule 3230 parallels the FTC and FCC telemarketing rules and also covers calls to wireless numbers. No member or associated person may initiate an outbound call to:

• a residence before 8 a.m. or after 9 p.m. in the called party's local time, unless there is an established business relationship, the person's prior express invitation or permission, or the person called is a broker or dealer;
• a person who asked to be on the firm-specific do-not-call list; or
• a number on the FTC's national do-not-call registry, unless an exception applies.

National registry exceptions are an established business relationship (EBR), the person's prior express written consent (a signed agreement that includes the number), and a personal relationship between the caller and the person called (family, friend or acquaintance). Under Rule 3230(m)(12), an EBR exists if the person:

• made a transaction, or had a security position, money balance or account activity, with the member (or its clearing firm) within the past 18 months;
• had an account for which the member was broker-dealer of record within the past 18 months; or
• inquired about a product or service within the past three months.

A request to be placed on the firm's do-not-call list ends the EBR exception for that member.

Procedures and safe harbor. Firms must keep a written do-not-call policy, train telemarketing personnel, record do-not-call requests at the time they are made, and honor them within a reasonable time not exceeding 30 days. To use the safe harbor for an inadvertent call to a registered number, the firm must show written procedures, training, a recorded do-not-call list, and use of a registry version obtained no more than 31 days before the call.

Disclosures and caller ID. The caller must promptly give the caller's name, the member's name, a telephone number or address for the member, and that the call's purpose is to solicit the purchase of securities or related services. Firms must transmit caller ID and may not block it. The number shown must allow do-not-call requests during business hours.

Other provisions limit abandoned calls: a call counts as abandoned if a representative is not connected within two seconds of the greeting, and the safe harbor allows no more than 3% per campaign. They also restrict prerecorded messages without express written agreement. A member that outsources telemarketing remains responsible for compliance.