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03-38 SEC Approves Amendments to NASD Rules Governing Member Communications with the Public
On May 9, 2003, the Securities and Exchange Commission ("SEC" or "Commission") approved amendments to NASD Rule 2210 (Communications with the Public) and the Interpretive Materials that follow Rule 2210, the creation of new Rule 2211 (Institutional Sales Material and Correspondence), and the renumbering of current Rule 2211 (Telemarketing) as Rule 2212 (collectively, the "Amendments").1 The Amendments modernize, simplify, and clarify the rules governing member communications with the public. The Amendments become effective on November 3, 2003. The amended Rule 2210 and accompanying Interpretive Materials are set forth in Attachment A.
Questions concerning this Notice should be directed to the Advertising Regulation Department, Regulatory Policy and Oversight, at (240) 386-4500.
The Amendments modernize and clarify the rules governing member communications with the public. Among the most notable changes, the Amendments exclude all communications to institutional investors from member pre-use approval and NASD filing requirements and from many of the content standards. Form letters and group e-mail to existing retail customers and fewer than 25 prospective retail customers also are eligible for these exclusions, provided that a member has appropriate policies and procedures to supervise and review such communications. Additionally, the Amendments exclude "independently prepared reprints" from the filing requirements and many of the content standards, and exclude certain press releases from the filing requirements. The Amendments also simplify the content standards applicable to those covered member communications.
Reorganization of Rule 2210
The Amendments rewrite many of the current regulatory standards contained in Rule 2210, and relocate certain of its provisions to other areas of the rule. In this regard, the Amendments substantially shorten and simplify the standards applicable to communications with the public, which are currently contained in Rule 2210(d). The Amendments relocate certain of these standards to new Interpretive Material 2210-1, Guidelines to Ensure that Communications Are Not Misleading.2 IM-2210-1 makes clear that members have the primary responsibility to ensure that their communications with the public are not misleading, and rewrites many standards in plain English.
New IM-2210-1 eliminates certain of the specific standards currently in Rule 2210, including those regarding non-existent or self-conferred degrees or designations, offers of free service, claims for research facilities, hedge clauses, recruiting advertising, and periodic investment plans. To the extent that these provisions prohibited statements that are misleading, unbalanced, or inaccurate regarding particular types of communications, they duplicate Rule 2210's more general prohibition on use of such statements.
The Amendments also create new Rule 2211—a separate rule for institutional sales material and correspondence that should facilitate a reader's ability to determine how the advertising rules apply to those communications. In order to further simplify this process, the Amendments provide cross-references between Rule 2210 and Rule 2211 in appropriate places. Existing Rule 2211, concerning telemarketing, is renumbered as Rule 2212.
Definition of "Communications with the Public"
The Amendments broaden the definition of "communications with the public" to include not only advertisements, sales literature, and correspondence, but also public appearances, institutional sales material, and independently prepared reprints.
The inclusion of public appearances within the definition of communications with the public does not change current NASD policy. In this regard, existing Rule 2210(d)(1)(C) provides that members who engage in public appearances or speaking activities must follow the content standards of Rule 2210(d) and (f). Consequently, public appearances already are subject to strict content requirements. New Rule 2210(a)(5) clarifies the application of Rule 2210 to such appearances by defining "public appearance" as a type of communication with the public.
Public appearances include participation in a seminar, forum (including an interactive electronic forum), radio or television interview, or other public appearance or public speaking activity. By defining "public appearance" to include an interactive electronic forum, the Amendments also codify the NASD staff's position that Internet chat rooms constitute public appearances rather than advertisements or sales literature for purposes of Rule 2210. The Amendments also provide members with more flexibility by subjecting public appearances only to some, but not all, of the content standards of Rule 2210.
Institutional Sales Material
Rule 2210 currently does not distinguish between retail and institutional sales material. Moreover, the rule currently defines "sales literature" to include any "form letter," which NASD has interpreted to mean written communications, including e-mail messages sent to at least two persons. Consequently, any communication sent to two or more institutional investors currently is deemed "sales literature," must comply with the content standards of Rule 2210, be pre-approved by a registered principal, and may have to be filed with the Advertising Regulation Department of NASD (the "Department") if it concerns certain types of products, such as registered investment companies.
The Amendments eliminate the pre-use approval and filing requirements applicable to communications that are distributed or made available only to institutional investors. Instead, institutional sales material will be subject to new supervision and review requirements that are modeled on those in Rule 3010, which currently apply to correspondence. Moreover, institutional sales material will continue to be subject to the record-keeping requirements and some, but not all, of the content standards in Rule 2210.3
The institutional sales material definition contains an important caveat: 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. For example, if a member has reason to believe that such a communication would be forwarded or made available to 401(k) plan participants or other beneficiaries of institutional accounts, it will be treated as retail sales material. Plan participants and other beneficiaries of institutional accounts are entitled to the same protections under the advertising rules as other retail investors. Similarly, an advertisement in a publication designed for broker/dealers or other institutional investors may not be treated as institutional sales material if the member has reason to believe that the publication will be made available to any person other than an institutional investor.
New Rule 2211(a)(3) defines "institutional investor" as any:
- person described in Rule 3110(c)(4), regardless of whether that person has an account with an NASD member;4
- governmental entity or subdivision thereof;
- 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 participants of such a plan;
- qualified plan, as defined in Section 3(a)(12)(C) of the Securities Exchange Act of 1934, that has at least 100 participants, but does not include any participant of such a plan;
- NASD member or registered associated person of such a member;5 and
- person acting solely on behalf of any such institutional investor.
Form Letters and Group Electronic Mail
The definition of "correspondence" has been amended to include form letters and group e-mails sent to existing retail customers and to fewer than 25 prospective retail customers within any 30 calendar-day period ("Group Correspondence"), as well as written and electronic communications prepared for delivery to a single retail customer. Rule 2211(a)(4) defines "existing retail customer" as any person, other than an institutional investor, 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 a member serves as principal underwriter. Thus, a person who has opened an account with an investment company or with a transfer agent for such an investment company could qualify as an existing retail customer of the investment company's principal underwriter.
Pursuant to new Rule 2211(b)(1)(A), principal approval is not required of Group Correspondence; however, such correspondence will be subject to the strict supervisory procedures in Rule 3010(d), which governs the approval and review of correspondence, and to those content standards that apply to correspondence. Form letters and group e-mails sent to 25 or more prospective retail customers within any 30 calendarday period will continue to be subject to the pre-use approval, filing, and recordkeeping requirements of Rule 2210, and to all of the content standards applicable to sales literature.6
NASD believes that Rule 3010(d) provides the most effective means of supervising form letters and group e-mails sent to existing and a limited number of prospective retail customers. Rule 3010(d) requires members to adopt written procedures for the review of correspondence by registered principals. Any member that does not pre-approve all correspondence must educate and train associated persons as to NASD rules governing communications with the public and the firm's procedures, document this training, and monitor adherence to these procedures. Members must retain all correspondence of registered representatives related to the member's investment banking or securities business.
Notice to Members 98-11 provides guidance to members concerning Rule 3010(d). The Notice makes clear that, at a minimum, a member must develop procedures for the review of some of each registered representative's correspondence with the public relating to the member's investment banking or securities business, tailored to its structure and the nature and size of its business and customers.
The Notice provides that members must:
- specify in writing the firm's policies and procedures for reviewing different types of correspondence;
- identify what types of correspondence will be pre- or post-reviewed by a registered principal; and
- periodically re-evaluate the effectiveness of the firm's procedures for reviewing public correspondence and consider any necessary revisions.
These procedures must be reasonably designed to ensure that a member's correspondence complies with the content standards of the applicable advertising rules.
Members will be expected to review their procedures to ensure that they adequately address potential concerns with the distribution of Group Correspondence. More specifically, members should consider whether to adopt stricter procedures that require registered principal pre-use approval and filing with NASD of Group Correspondence that presents a higher risk to investors. This determination should be based upon such factors as the content, purpose, and targeted audience of the Group Correspondence.
Thus, for example, members may wish to consider adopting procedures requiring pre-use principal review and filing as appropriate with NASD of Group Correspondence that promotes a new investment product or strategy that is sent to existing retail customers. In addition, members should strongly consider requiring pre-use principal review of Group Correspondence sent by a registered representative that has been disciplined in the past for advertising or sales practice violations.
Independently Prepared Reprints
The Amendments define a new type of communication with the public, an "independently prepared reprint," and exclude them from the filing requirements and most of the content standards. Under Rule 2210(a)(6)(A), an independently prepared reprint consists of any article reprint that meets certain standards that are designed to ensure that the reprint was issued by an independent publisher and was not materially altered by the member. A member may alter the contents of an independently prepared reprint in a manner necessary to make it consistent with applicable regulatory standards or to correct factual errors.
An article reprint qualifies as an "independently prepared reprint" under Rule 2210(a)(6)(A) only if, among other things, its publisher is not an affiliate of the member using the reprint or any underwriter or issuer of the security mentioned in the reprint. For purposes of this provision, "affiliate" has the same meaning as that term is defined in NASD Rule 2720(b)(1)(A) and (B). The term "affiliate" as used in Rule 2210(a)(6)(B) also has this meaning.
Pursuant to Rule 2210(a)(6)(B), independently prepared reprints also include independent reports concerning investment companies that meet certain standards. Under current Rule 2210(c)(7)(G), these types of reports are already exempt from the Rule 2210 filing requirements for investment company sales material. This filing exemption is maintained by including these reports within the definition of independently prepared reprint.
Some, but not all, content standards apply to independently prepared reprints. For example, Rule 2210(d)(1) will impose various content standards on all communications with the public, including independently prepared reprints. Independently prepared reprints are subject to the pre-use approval and record-keeping requirements of Rule 2210.
Article reprints and research reports that do not meet the definition of "independently prepared reprint" constitute sales literature that must meet all of the requirements applicable to sales literature.
General Filing Requirements
The Amendments maintain many of current Rule 2210's filing requirements for advertisements and sales literature. In this regard, advertisements and sales literature concerning registered investment companies that are not governed by Rule 2210(c)(3) or Rule 2210(c)(4) still must be filed with the Department within 10 business days of first use or publication. This 10-business-day filing requirement also continues to apply to advertisements and sales literature concerning public direct participation programs and advertisements concerning government securities.
Rule 2210(c)(3) continues to apply a 10-business day pre-filing requirement to sales literature containing bond fund volatility ratings. New Rule 2210(c)(4) maintains the 10-business day pre-filing requirement for registered investment company advertisements and sales literature that include or incorporate selfcreated rankings or comparisons, advertisements concerning collateralized mortgage obligations, and advertisements concerning security futures.
Television and Video Advertisements
New Rule 2210(c)(6) requires members that have filed a draft version or "storyboard" of a television or video advertisement pursuant to a filing requirement also to file the final filmed version within 10 business days of first use or broadcast. This provision codifies an existing Department policy regarding television and video sales material. The Department imposes a filing fee only when the draft version or storyboard is filed. No additional fee is assessed when the final filmed version is filed.
Rule 2210(a)(2) defines "sales literature" to include press releases concerning a member's product or service. New Rule 2210(c)(8)(G) excludes from the filing requirements press releases that are made available only to members of the media.
Legends and Footnotes
New Rule 2210(d)(1)(C) provides that information may be placed in a legend or footnote only when such placement would not inhibit an investor's understanding of the communication. Thus, for example, footnotes in especially small type in an advertisement might be deemed to inhibit an investor's understanding of the advertisement. Similarly, an advertisement that presents bold claims that are supposedly "balanced" only with footnote disclosure might not comply with this content standard.
Use and Disclosure of a Member's Name
New Rule 2210(d)(2)(C) simplifies the current provisions concerning disclosure of member names by deleting many of the current specific provisions governing the use of member names. In addition, Rules 2210(d)(2)(C) and 2211(d)(2) make clear that the requirement to disclose the member's name applies to advertisements, sales literature, correspondence, business cards, and letterhead. NASD does not intend to modify the substance of the current standards in Rule 2210(f) with regard to use and disclosure of member names, however. Accordingly, members' use of names that meet the current standards of Rule 2210(f) will also be deemed to be in compliance with new Rules 2210(d)(2)(C) and 2211(d)(2).
The provisions governing member recommendations have been relocated from current Rule 2210(d)(2)(B) to new IM-2210-1(6). These provisions have been modified in several respects to make them consistent with NASD Rule 2711, which requires certain disclosures when securities are recommended in member research reports.
First, current Rule 2210(d)(2)(B)(i)(a) requires a member to disclose if the member "usually" makes a market in the securities being recommended. New IM-2210-1(6)(A)(i) will require a member to disclose if the member was making a market in the securities being recommended at the time the advertisement or sales literature was published.
Second, current Rule 2210(d)(2)(B)(i)(b) requires a member to disclose if the member or its officers and partners own options, security futures, rights, or warrants to purchase the recommended issuer's securities, unless the extent of such ownership is nominal. New IM-2210-1(6)(A)(ii) will require the member to disclose if the member or its officers or partners have a financial interest in any of the recommended issuer's securities, and the nature of the financial interest, unless the extent of the financial interest is nominal. A member that discloses in its research reports that it owns one percent or more of any class of common equity securities of a recommended issuer pursuant to Rule 2711(h)(1)(B) will be deemed to be in compliance with the requirement to disclose its financial interest in the recommended issuer pursuant to IM-2210-1(6)(A)(ii).
Finally, current Rule 2210(d)(2)(B)(i)(b) requires a member to disclose if the member had acted as manager or co-manager of a public offering of the recommended issuer's securities within the last three years. Under new IM-2210-1(6)(A)(iii), this look-back period will be shortened to the past 12 months.
New IM-2210-3 (Use of Rankings in Investment Companies Advertisements and Sales Literature) modifies the current ranking guidelines in several respects. First, IM-2110-3(b) makes clear that no advertisement or sales literature may present a ranking, except those (1) created and published by a Ranking Entity, which the ranking guidelines define to include certain independent entities, or (2) created by an investment company or an investment company affiliate but based on the performance measurements of a Ranking Entity.7 Second, the ranking guidelines in IM-2210-3 apply only to advertisements and sales literature.
Third, IM-2210-3(g) permits the use of investment company family rankings, provided that when a particular investment company is being advertised, the individual rankings for that investment company also must be presented. Of course, as with all performance rankings, use of an investment company family ranking must comply with the other applicable requirements of Rule 2210.
Limitations on Use of NASD's Name
Communications About Collateralized Mortgage Obligations
The Amendments rewrite existing IM-2210-1 (the CMO Guidelines), which governs communications about collateralized mortgage obligations and renumber it as IM-2210-8. The Amendments simplify, shorten, and reorganize the CMO Guidelines to provide a more straightforward and uniform list of disclosure requirements.
1 SEC Release No. 34-47820 (May 9, 2003), 68 Fed. Reg. 27116 (May 19, 2003) (SR-NASD-00-12) (www.nasdr.com/pdf-text/rf03_94_app.pdf). On June 11, 2003, NASD filed a technical amendment to Rule 2210 that reinserted certain current Rule 2210 language that was inadvertently omitted from the Amendments. See SEC Release No. 34-48079 (June 24, 2003), 68 Fed. Reg. 39171 (July 1, 2003) (SR-NASD-2003-94).
3 The Amendments revise the content standards to specifically indicate which type of communication is subject to each standard. Therefore, standards that apply only to "advertisements" or "sales literature" will not apply to institutional sales material. For example, the ranking guidelines in IM-2210-3 will apply only to advertisements and sales literature and therefore will not apply to institutional sales material.
4 Rule 3110(c)(4) defines "institutional account" to mean the account of a bank, savings and loan, insurance company, registered investment company, or registered investment adviser. It also includes the account of any other entity or natural person with total assets of at least $50 million. For purposes of Rule 2210 and Rule 2211, the term "institutional investor" includes trust companies organized under state law that come within the definition of "bank" in Article I(b) of the NASD By-Laws.
5 Currently all content standards of Rule 2210 apply to advertisements and sales literature sent only to members or their registered persons. By including this material within the definition of institutional sales material, and subjecting it only to those standards applicable to institutional sales material, the Amendments provide members with more flexibility to include various information in broker/dealer-only material.
6 The Amendments will permit members to treat form letters or group e-mail sent to a combination of existing customers and fewer than 25 prospective retail customers within any 30 calendar-day period as correspondence. Of course, members may not "sanitize" an advertisement or item of sales literature by enclosing it with Group Correspondence. For example, an item that a member has distributed as sales literature will remain sales literature for purposes of Rule 2210 when the member encloses it in Group Correspondence.
As of November 3, 2003, current Rule 2210 and Interpretive Materials 2210-1, 2210-3, and 2210-4 are replaced with the following rule language. In addition, as of November 3, 2003, Interpretive Materials 2210-2 and 2210-7 are revised as shown below, and new Rule 2211 and Interpretive Material 2210-8 become effective.
2210. Communications with the Public
A registered principal of the member must approve by signature or initial and date each advertisement, item of sales literature and independently prepared reprint before the earlier of its use or filing with NASD's Advertising Regulation Department ("Department"). With respect to debt and equity securities that are the subject of research reports as that term is defined in Rule 472 of the New York Stock Exchange, this requirement may be met by the signature or initial of a supervisory analyst approved pursuant to Rule 344 of the New York Stock Exchange. A registered principal qualified to supervise security futures activities must approve by signature or initial and date each advertisement or item of sales literature concerning security futures.
The member must provide with each filing under this paragraph the actual or anticipated date of first use, the name and title of the registered principal who approved the advertisement or sales literature, and the date that the approval was given.
Within 10 business days of first use or publication, a member must file the following advertisements and sales literature with the Department:
Sales literature concerning bond mutual funds that include or incorporate bond mutual fund volatility ratings, as defined in Rule IM-2210-5, shall be filed with the Department for review at least 10 business days prior to use (or such shorter period as the Department may allow in particular circumstances) for approval and, if changed by NASD, shall be withheld from publication or circulation until any changes specified by NASD have been made or, if expressly disapproved, until the sales literature has been refiled for, and has received, NASD approval. Members are not required to file advertising and sales literature which have previously been filed and which are used without change. The member must provide with each filing the actual or anticipated date of first use. Any member filing sales literature pursuant to this paragraph shall provide any supplemental information requested by the Department pertaining to the rating that is possessed by the member.
At least 10 business days prior to first use or publication (or such shorter period as the Department may allow), a member must file the following communications with the Department and withhold them from publication or circulation until any changes specified by the Department have been made:
If a member has filed a draft version or "story board" of a television or video advertisement pursuant to a filing requirement, then the member also must file the final filmed version within 10 business days of first use or broadcast.
In addition to the foregoing requirements, each member's written and electronic communications with the public may be subject to a spot-check procedure. Upon written request from the Department, each member must submit the material requested in a spot-check procedure within the time frame specified by the Department.
The following types of material are excluded from the filing requirements and (except for the material in paragraphs (G) through (J)) the foregoing spot-check procedures:
Although the material described in paragraphs (c)(8)(G) through (J) is excluded from the foregoing filing requirements, investment company communications described in those paragraphs shall be deemed filed with NASD for purposes of Section 24(b) of the Investment Company Act of 1940 and Rule 24b-3 thereunder.
This paragraph (C) does not apply to so-called "blind" advertisements used to recruit personnel.
Any violation by a member of any rule of the SEC, the Securities Investor Protection Corporation or the Municipal Securities Rulemaking Board applicable to member communications with the public will be deemed a violation of this Rule 2210.
IM-2210-1. Guidelines to Ensure That Communications With the Public Are Not Misleading
Every member is responsible for determining whether any communication with the public, including material that has been filed with the Department, complies with all applicable standards, including the requirement that the communication not be misleading. In order to meet this responsibility, member communications with the public must conform with the following guidelines. These guidelines do not represent an exclusive list of considerations that a member must make in determining whether a communication with the public complies with all applicable standards.
IM-2210-2. Communications with the Public About Variable Life Insurance and Variable Annuities
The standards governing communications with the public are set forth in Rule 2210. In addition to those standards, the following guidelines must be considered in preparing advertisements and sales literature about variable life insurance and variable annuities. The guidelines are applicable to advertisements and sales literature as defined in Rule 2210, as well as individualized communications such as personalized letters and computer generated illustrations, whether printed or made available on-screen.
No change to rule text.
In order to show how an existing fund would have performed had it been an investment option within a variable life insurance policy or variable annuity, communications may contain the fund's historical performance that predates its inclusion in the policy or annuity. Such performance may only be used provided that no significant changes occurred to the fund at the time or after it became part of the variable product. However, communications may not include the performance of an existing fund for the purposes of promoting investment in a similar, but new, investment option (i.e., clone fund or model fund) available in a variable contract. The presentation of historical performance must conform to applicable NASD and SEC standards. Particular attention must be given to including all elements of return and deducting applicable charges and expenses.
A comparison of investment products may be used provided the comparison complies with applicable requirements set forth under Rule 2210. Particular attention must be paid to the specific standards regarding "comparisons" set forth in Rule 2210(d)(2)(B).
IM-2210-3. Use of Rankings in Investment Companies Advertisements and Sales Literature
For purposes of the following guidelines, the term "Ranking Entity" refers to any entity that provides general information about investment companies to the public, that is independent of the investment company and its affiliates, and whose services are not procured by the investment company or any of its affiliates to assign the investment company a ranking.
Members may not use investment company rankings in any advertisement or item of sales literature other than (1) rankings created and published by Ranking Entities or (2) rankings created by an investment company or an investment company affiliate but based on the performance measurements of a Ranking Entity. Rankings in advertisements and sales literature also must conform to the following requirements.
A headline or other prominent statement must not state or imply that an investment company or investment company family is the best performer in a category unless it is actually ranked first in the category.
All advertisements and sales literature containing an investment company ranking must disclose prominently:
All advertisements and sales literature containing an investment company ranking also must disclose:
Any investment company ranking included in an item of sales literature must be, at a minimum, current to the most recent calendar quarter ended prior to use. Any investment company ranking included in an advertisement must be, at minimum, current to the most recent calendar quarter ended prior to the submission for publication. If no ranking that meets this requirement is available from the Ranking Entity, then a member may only use the most current ranking available from the Ranking Entity unless use of the most current ranking would be misleading, in which case no ranking from the Ranking Entity may be used.
Except for money market mutual funds:
Investment company rankings for more than one class of investment company with the same portfolio must be accompanied by prominent disclosure of the fact that the investment companies or classes have a common portfolio.
Advertisements and sales literature may contain rankings of investment company families, provided that these rankings comply with the guidelines above, and further provided that no advertisement or sales literature for an individual investment company may provide a ranking of an investment company family unless it also prominently discloses the various rankings for the individual investment company supplied by the same Ranking Entity, as described in paragraph (d)(2)(B). For purposes of this IM-2210-3, the term "investment company family" means any two or more registered investment companies or series thereof that hold themselves out to investors as related companies for purposes of investment and investor services.
IM-2210-4. Limitations on Use of NASD's Name
Members may indicate NASD membership in conformity with Article XV, Section 2 of the NASD By-Laws in the following ways:
Upon request to NASD, a member will be entitled to receive an appropriate certification of membership, which may be displayed in the principal office or a registered branch office of the member. The certification shall remain the property of NASD and must be returned by the member upon request of the NASD Board or its Chief Executive Officer.
IM-2210-7 Guidelines for Communications with the Public Regarding Securities Futures
Notwithstanding the provisions of Rule 2210(d)(1)(D), security futures sales literature and correspondence may contain projected performance figures (including projected annualized rates of return), provided that:
IM-2210-8 Communications with the Public About Collateralized Mortgage Obligations (CMOs)
For purposes of the following guidelines, the term "collateralized mortgage obligation" (CMO) refers to a multiclass debt instrument backed by a pool of mortgage pass-through securities or mortgage loans, including real estate mortgage investment conduits (REMICs) as defined in the Tax Reform Act of 1986.
All advertisements, sales literature and correspondence concerning CMOs:
Before the sale of a CMO to any person other than an institutional investor, a member must offer to the customer educational material that includes the following:
In addition to the standards set forth above, advertisements, sales literature and correspondence that promote a specific security or contain yield information must conform to the standards set forth below. An example of a compliant communication appears at the end of this section.
|Section 1||Title - Collateralized Mortgage Obligations|
Anticipated Yield/Average Life
Specific Tranche - Number & Class
Final Maturity Date
|Section 2||Disclosure Statement:|
"The yield and average life shown above consider prepayment assumptions that may or may not be met. Changes in payments may significantly affect yield and average life. Please contact your representative for information on CMOs and how they react to different market conditions."
|Section 3||Product Features (Optional):|
Income Payment Structure
Generic Description of Tranche (e.g., PAC, Companion)
Yield to Maturity of CMOs Offered at Par
|Section 4||Company Information:|
The following conditions must also be met:
"The following is an advertisement for Collateralized Mortgage Obligations. Contact your representative for information on CMOs and how they react to different market conditions."
"The yield and average life reflect prepayment assumptions that may or may not be met. Changes in payments may significantly affect yield and average life."
Collateralized Mortgage Obligations
7.75% Anticipated Yield to 22-Year Average Life
FNMA 9532X, Final Maturity March 2023
Collateral 100% FNMA 7.50%
The yield and average life shown above reflect prepayment assumptions that may or may not be met. Changes in payments may significantly affect yield and average life. Please contact your representative for information on CMOs and how they react to different market conditions.
Income Paid Monthly
Implied Rating/Volatility Rating
Principal and Interest Payments Backed by FNMA
Offered subject to prior sale and price change.
Call Mary Representative at (800)555-1234
Your Company Securities, Inc., Member SIPC
123 Main Street
Anytown, State 12121
2211. Institutional Sales Material and Correspondence
For purposes of Rule 2210, this Rule, and any interpretation thereof:
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.
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 spotcheck procedure within the time frame specified by the Department.
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.
No change to rule text.