Communications with the Public

Regulatory Obligations and Related Considerations

Regulatory Obligations

FINRA Rule 2210 (Communications with the Public) defines all communications into one of three categories—correspondence, retail communications, or institutional communications—and sets principles-based content standards that are designed to apply to ongoing developments in communications technology and practices. New member firms are required to file all widely disseminated retail communications with FINRA’s Advertising Regulation Department during their first year of membership, and all member firms are subject to filing requirements for specified retail communications depending on their content.

FINRA Rule 2220 (Options Communications) governs member firms’ communications with the public concerning options. Additionally, MSRB Rule G-21 (Advertising by Brokers, Dealers or Municipal Securities Dealers) contains similar content standards relating to municipal securities or concerning the facilities, services or skills of any municipal dealer.

Related Considerations

• General Content Standards
  • Do your firm’s communications contain false, misleading, or promissory statements or claims?
  • Do your firm’s communications include material information necessary to make them fair, balanced and not misleading? For example, if a communication promotes the benefits of a high-risk or illiquid security, does it explain the associated risks?
  • Do your firm’s communications balance specific claims of benefits from a product or service (especially complex products) with the key risks specific to that product or service?
  • Do your firm’s communications contain predictions or projections of investment performance to investors that are generally prohibited by FINRA Rule 2210(d)(1)(F)?
• Mobile Apps
  • At account opening, do your mobile apps clearly disclose applicable risks and adequately explain other features such as margin or options accounts?
  • Do your mobile apps consider detailed customer information—including the customer’s knowledge, investment experience, age, financial situation and investment objectives—when approving access to options or other complex products?
  • Do your mobile apps adequately distinguish between products and services of the broker-dealer and those of affiliates or third parties?
  • Has your firm established and implemented a reasonably designed supervisory system for communications through mobile apps? 
  • Have you tested the accuracy of account information, including labels and data, displayed in your mobile apps?
  • Do your mobile apps accurately describe how their features work?
  • Do your mobile apps identify information in ways that are easily understandable, based on the experience level of your customers?
  • Do your mobile apps provide investors with readily available information to explain complex strategies and investments and associated risks?
  • Does any information provided to retail customers through your mobile apps constitute a “recommendation” that would be covered by Reg BI, and in the case of recommendations of options or variable annuities, FINRA Rules 2360 (Options) or 2330 (Members’ Responsibilities Regarding Deferred Variable Annuities)? If so, how does your firm comply with the related obligations?
• Digital Communication Channels
  • Does your firm’s digital communication policy address all permitted and prohibited digital communication channels and features available to your customers and associated persons?
  • Does your firm review for red flags that may indicate a registered representative is communicating through an unapproved communication channel, and does your firm follow up on such red flags (e.g., email chains that copy unapproved representative email addresses, references in emails to communications that occurred outside approved firm channels or customer complaints mentioning such communications)?
  • How does your firm supervise and maintain books and records in accordance with SEC and FINRA Books and Records Rules for all digital communications with the public?
  • Does your firm have a process to confirm that all business-related communications with the public comply with the content standards set forth in FINRA Rule 2210?
• Crypto Asset Communications: If your firm communicates regarding crypto asset activities:
  • Does your firm provide a fair and balanced presentation of the extent to which the federal securities laws or FINRA rules apply to the crypto asset products or services, including with respect to the application of protections afforded under the Securities Investor Protection Act of 1970 (SIPA)?
  • Do your firm’s communications misleadingly state or suggest that FINRA or any other regulator has approved, endorsed or guaranteed a crypto asset or service?
  • Does your firm accurately describe the risks associated with the manner in which the crypto asset is issued, held or transferred?
  • Do your firm’s communications misleadingly imply that crypto asset services offered through an affiliated entity are offered through and under the supervision, clearance and custody of a registered broker-dealer?
• Municipal Securities Communications: If your firm offers municipal securities, does it confirm that “advertisements” for such securities—as defined under MSRB Rule G-21—include the necessary information to be fair, balanced and not misleading, and do not include:
  • exaggerated claims about safety or misleading comparisons to U.S. Treasury securities;
  • statements claiming “direct access” to bonds in the primary market if your firm is not an underwriter; or
  • unwarranted claims about the predictability or consistency of growth or payments?
• If an advertisement includes claims of municipal securities being “tax free,” does it also explain any applicable state, local, alternative minimum tax, capital gains or other tax consequences?
• If an advertisement includes a “taxable equivalent” yield on a municipal security offering, does it provide sufficient information regarding the tax bracket used to make the calculation?
• Communications Promoting Revenue Sharing Programs: If your firm distributes or makes available communications that promote or recommend revenue sharing programs to retail investors (e.g., fully paid securities lending programs), do the communications accurately and clearly disclose the terms and conditions of the program, including the portion of fees customers would receive?  
• Communications Promoting ESG Factors: If your firm offers products that promote Environmental, Social and Governance (ESG) factors, do your communications:
  • contain claims that are unsupported by or inconsistent with information contained in the product’s offering documents;
  • lack risk disclosure or language necessary to balance any promotional claims regarding ESG; or
  • use rankings, ratings or awards that lack a sound basis or are unwarranted or misleading based on the criteria used or factors considered?

Findings and Effective Practices

Findings

• False, Misleading and Inaccurate Information in Mobile Apps:
  • Incorrect or misleading account balances or inaccurate information regarding accounts’ historical performance.
  • Sending margin call warnings to customers whose account balances were not approaching, or were below, minimum maintenance requirements.
  • Falsely informing customers that their accounts were not enabled to trade on margin, when the accounts were, in fact, margin enabled. 
  • Misstating the risk of loss associated with certain options transactions.
  • Distributing false and misleading promotions through social media and “push” notifications on mobile apps that made promissory claims or omitted material information.
• Insufficient Supervision of and Recordkeeping for Digital Communications: Not maintaining reasonably designed policies and procedures to identify and respond to red flags—such as those arising from customer complaints, representatives’ emails, OBA reviews or advertising reviews—that registered representatives may be making business-related digital communications to firm customers using channels not approved and controlled by the firm, including texting, messaging, social media, collaboration apps or “electronic sales seminars” in chatrooms.
• Deficient Communications Promoting Crypto Assets:
  • Failing to adequately disclose that crypto assets or services may not be covered under the federal securities laws or SIPA. 
  • Falsely implying that crypto assets or services are covered by SIPA or the federal securities laws.
  • Falsely identifying the broker-dealer as the entity from which crypto assets may be purchased or creating confusion about which entity is offering crypto assets where the entity offering the crypto assets uses an identical or substantially similar name to the broker-dealer’s name.
• Municipal Securities Advertisements: Making false and misleading statements or claims about safety, unqualified or unwarranted claims regarding the expertise of the firm, and promissory statements and claims regarding portfolio growth.
• Communications Promoting ESG Factors:
  • Using fund communications that contain claims that are inconsistent with or unsupported by the fund’s offering documents. 
  • Including rankings, ratings, or awards that lack a sound basis or are unwarranted or misleading based on the criteria used or factors considered.

Effective Practices

• Reasonably Designed Procedures for Mobile Apps: Maintaining and implementing procedures for the supervision of mobile apps, for example, that confirm:
  • data displayed to customers is accurate; and
  • information about mobile apps’ tools and features complies with FINRA’s communications and other relevant rules before it is posted to investors.
• Reasonably Designed Procedures for Digital Communications: Maintaining and implementing procedures for supervision of digital communication channels, including:
  • Monitoring of New Tools and Features: Monitoring new communication channels, apps and features available to associated persons and customers.
  • Defining and Enforcing What is Permissible and Prohibited: Clearly defining permissible and prohibited digital communication channels, tools and features, and blocking those prohibited channels, tools and features that prevent firms from complying with their recordkeeping requirements.
  • Supervision: Implementing supervisory review procedures tailored to each digital channel, tool and feature.
  • Video Content Protocols: Developing WSPs and controls for live-streamed public appearances, scripted presentations or video blogs.
  • Training: Implementing mandatory training programs prior to providing access to firm-approved digital channels, including expectations for business and personal digital communications and guidance for using all permitted features of each channel.
  • Disciplinary Action: Temporarily suspending or permanently blocking from certain digital channels or features those registered representatives who did not comply with the policies and requiring them to take additional digital communications training before resuming use.
• Crypto Asset Communications: Maintaining and implementing procedures for firm crypto asset communications, including:
  • Risk Disclosure: Prominently describing the risks associated with the manner in which the crypto asset is issued, held or transferred; and balancing any statements or claims contained in a crypto asset communication with a discussion of related risks, including that such investments are speculative, may have no value, involve a high degree of risk, are generally illiquid, have uncertain regulatory protections, are subject to potential market manipulation risks and may expose investors to loss of principal.
  • Communications Review: Reviewing firms’ communications to confirm that they are not exaggerating the potential benefits of crypto assets or overstating the current or future status of crypto asset projects or platforms.
  • Differentiating Crypto Asset Products Communications From Broker-Dealer Products Communications: Identifying, segregating and differentiating firms’ communications related to broker-dealer products and services from those related to offerings by affiliates or third parties, including crypto asset affiliates; and clearly and prominently identifying in communications entities responsible for non-securities crypto assets businesses (and explaining that such services were not offered by the broker-dealer or subject to the same regulatory protections as those available for securities).

• Municipal Securities Advertisements: Maintaining and implementing reasonably designed procedures for firm municipal securities communications, including:
  • requiring prior approval of all advertisements concerning municipal securities by an appropriately qualified principal to confirm the content complies with applicable content standards;
  • providing education and training for firm personnel on applicable FINRA and MSRB rules and firm policies;
  • balancing statements concerning the benefits of municipal securities by prominently describing the risks associated with municipal securities, including credit risk, market risk and interest rate risk; and
  • reviewing firms’ communications to confirm that the potential benefits of tax features are accurate and not exaggerated.
• Communications Promoting ESG Factors: Implementing and maintaining reasonably designed procedures for communications promoting ESG factors, including:
  • reviewing communications to ensure that ESG-related claims are consistent with and supported by applicable offering documents;
  • balancing statements promoting ESG factors by prominently describing the risks associated with ESG funds, including that:
    • ESG-related strategies may not result in favorable investment performance;
    • there is no guarantee that the fund’s ESG-related strategy will be successful; and
    • the fund may forego favorable market opportunities in order to adhere to ESG-related strategies or mandates.

Additional Resources

• FINRA
  • Advertising Regulation Topic Page
  • Social Media Topic Page
  • Regulatory Notice 21-25 (FINRA Continues to Encourage Firms to Notify FINRA if They Engage in Activities Related to Digital Assets)  
  • Regulatory Notice 20-21 (FINRA Provides Guidance on Retail Communications Concerning Private Placement Offerings)
  • Regulatory Notice 19-31 (Disclosure Innovations in Advertising and Other Communications with the Public)
  • Regulatory Notice 17-18 (Guidance on Social Networking Websites and Business Communications)
  • Regulatory Notice 11-39 (Social Media Websites and the Use of Personal Devices for Business Communications)
  • Regulatory Notice 10-06 (Guidance on Blogs and Social Networking Web Sites)
• MSRB
  • MSRB Notice 2019-07
  • MSRB Notice 2018-18