Past version: effective from Feb 5 2009 - Feb 3 2013.
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SR-FINRA-2011-035 has been approved by the SEC. Effective February 4, 2013, this rule will no longer be applicable. Please consult the appropriate FINRA rule.
For purposes of Rule 2210
, this Rule, and any interpretation thereof:
(1) "Correspondence" consists of any written letter or electronic mail message and any market letter
distributed by a member to:
(A) one or more of its existing retail customers; and
(B) fewer than 25 prospective retail customers within any 30 calendar-day period.
(2) "Institutional Sales Material" consists of any communication that is distributed or made available only to institutional investors.
(3) "Institutional Investor" means any:
(A) person described in Rule 3110
(c)(4), regardless of whether that person has an account with an NASD member;
(B) governmental entity or subdivision thereof;
(C) employee benefit plan that meets the requirements of Section 403(b) or Section 457 of the Internal Revenue Code and has at least 100 participants, but does not include any participant of such a plan;
(D) qualified plan, as defined in Section 3(a)(12)(C) of the Act, that has at least 100 participants, but does not include any participant of such a plan;
(E) NASD member or registered associated person of such a member; and
(F) person acting solely on behalf of any such institutional investor.
No member may treat a communication as having been distributed to an institutional investor if the member has reason to believe that the communication or any excerpt thereof will be forwarded or made available to any person other than an institutional investor.
(4) "Existing Retail Customer" means any person for whom the member or a clearing broker or dealer on behalf of the member carries an account, or who has an account with any registered investment company for which the member serves as principal underwriter, and who is not an institutional investor. "Prospective Retail Customer" means any person who has not opened such an account and is not an institutional investor.
(5) “Market Letter” means any written communication excepted from the definition of “research report” pursuant to Rule 2711(a)(9)(A).
(b) Approval and Recordkeeping
(1) Registered Principal Approval
(A) Correspondence. Correspondence need not be approved by a registered principal prior to use, unless such correspondence is distributed to 25 or more existing retail customers within any 30 calendar-day period and makes any financial or investment recommendation or otherwise promotes a product or service of the member. All correspondence is subject to the supervision and review requirements of Rule 3010(d).
(B) Institutional Sales Material. Each member shall establish written procedures that are appropriate to its business, size, structure, and customers for the review by a registered principal of institutional sales material used by the member and its registered representatives. Such procedures should be in writing and be designed to reasonably supervise each registered representative. Where such procedures do not require review of all institutional sales material prior to use or distribution, they must include provision for the education and training of associated persons as to the firm's procedures governing institutional sales material, documentation of such education and training, and surveillance and follow-up to ensure that such procedures are implemented and adhered to. Evidence that these supervisory procedures have been implemented and carried out must be maintained and made available to NASD upon request.
(A) Members must maintain all institutional sales material in a file for a period of three years from the date of last use. The file must include the name of the person who prepared each item of institutional sales material.
(B) Members must maintain in a file information concerning the source of any statistical table, chart, graph or other illustration used by the member in communications with the public.
(c) Spot-Check Procedures
Each member's correspondence and institutional sales literature may be subject to a spot-check procedure under Rule 2210
. Upon written request from the Advertising Regulation Department (the "Department"), each member must submit the material requested in a spot-check procedure within the time frame specified by the Department.
(d) Content Standards Applicable to Institutional Sales Material and Correspondence
(1) All institutional sales material and correspondence are subject to the content standards of Rule 2210
(d)(1) and the applicable Interpretive Materials under Rule 2210
, and all correspondence is subject to the content standards of Rule 2210
(2) All correspondence (which for purposes of this provision includes business cards and letterhead) must:
(A) prominently disclose the name of the member and may also include a fictional name by which the member is commonly recognized or which is required by any state or jurisdiction;
(B) reflect any relationship between the member and any non-member or individual who is also named; and
(C) if it includes other names, reflect which products or services are being offered by the member.
(3) Members may not use investment company rankings in any correspondence other than rankings based on (A) a category or subcategory created and published by a Ranking Entity as defined in IM-2210-3
(a) or (B) a category or subcategory created by an investment company or an investment company affiliate but based on the performance measurements of a Ranking Entity.
(e) Violation of Other Rules
Any violation by a member of any rule of the SEC, the Securities Investor Protection Corporation or the Municipal Securities Rulemaking Board applicable to institutional sales material or correspondence will be deemed a violation of this Rule and Rule 2210