12.3 Communications with the Public

FINRA Rule 2210 — Three Categories

Every written (including electronic) communication a firm sends falls into one of three buckets defined by audience size and type. The dividing number you must memorize is 25 retail investors in any 30 calendar days.

A "retail investor" is any person other than an institutional investor. An institutional investor includes banks, insurance companies, registered investment companies and advisers, government entities, employee-benefit plans, and any person or entity with at least $50 million in total assets.

Approval, Filing, and Recordkeeping

Retail communications generally require a registered principal to approve them before first use (or before filing, whichever is first). Some retail communications must also be filed with FINRA's Advertising Regulation Department. Records of all categories are kept for at least three years from last use.

Trap: the new-member rule reverses the timing — file before use, giving FINRA a chance to review. Established firms file after use.

Content Standards

All communications must be fair, balanced, and not misleading, must provide a sound basis for evaluating the security, and must not omit material risks. Prohibited content includes:

• Guarantees of gains or against loss ("this bond is guaranteed to return 5%")
• Predictions or projections of a specific price or performance
• Exaggerated or unwarranted claims ("completely safe," "can't lose")
• Cherry-picked testimonials showing only winners
• Promissory language that hides risk

Projections of performance are generally barred; however, certain investment analysis tools and targeted-return illustrations are allowed under narrow conditions with required disclosures.

Testimonials, Social Media, and Email

Under the SEC Marketing Rule and FINRA guidance, testimonials and endorsements are permitted only with clear disclosure of compensation and conflicts. For social media, static content (a profile bio, a pinned page) is treated like a retail communication requiring principal approval, while interactive, real-time posts are treated more like correspondence subject to supervision and post-use review. Firms must capture and retain business-related electronic communications in a non-rewriteable, non-erasable (WORM) format and produce them on regulatory request.

Distinguishing the Categories With Examples

The classification turns on who receives a piece and how many, counted over a rolling 30-day window:

• A glossy brochure mailed to 5,000 households = retail communication (public, well over 25).
• A personalized email to a single client recapping a meeting = correspondence (one retail investor).
• A pitch book sent only to a pension fund's investment committee = institutional communication.
• A market commentary posted publicly on the firm's website = retail communication, because it can reach more than 25 retail investors.

If even one of the 26+ recipients is a retail investor (and the piece is not solely institutional), treat the piece as retail. Counting recipients correctly is the single most-tested skill in this section.

Independently Prepared Reprints and Public Appearances

An independently prepared reprint (IPR) — a third-party article a firm did not influence — gets lighter treatment and is generally excluded from filing, provided the firm did not commission or edit it. Public appearances (seminars, radio, TV, live interviews) are not themselves communications subject to pre-approval, but any scripts, slides, or handouts used are, and the speaker must still meet the fair-and-balanced standard. Recommendations made in a public appearance require disclosure of the firm's position if it makes a market or holds the security.

Bond and Mutual-Fund Specifics

Mutual-fund sales literature that shows performance must include standardized SEC-formula returns, the maximum sales load's effect, and a statement that current performance may differ. Bond communications may not imply a guarantee from ratings alone, and must show that a bond fund's yield is not guaranteed. Options communications require an Options Disclosure Document (ODD) to precede or accompany them. Range or volatility claims and any projected returns must carry prominent risk disclosure and a sound basis.

Recordkeeping and Approval Summary

On the Exam

Drill the 25-investor/30-day line, who needs principal pre-approval (retail, not correspondence or institutional), the reversed 10-business-day timeline for new members, the $50 million institutional threshold, and the absolute prohibition on guarantees and specific performance predictions. Watch fact patterns that count recipients to classify the message.