Communications with Prospects and Customers - FINRA Conduct Rule 2211

Institutional Sales Material and Correspondence

Correspondence consists of any written letter or electronic mail message distributed by a member to:

  • one or more of its existing retail customers; and
  • fewer than 25 prospective retail customers within any 30-calendar-day period.

Institutional Sales Material consists of any communication that is distributed or made available only to institutional investors.

Institutional Investor means any:

  • person described in Rule 3110 (c)(4), regardless of whether that person has an account with an FINRA member;

  • 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 participant of such a plan;

  • 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;

  • FINRA member or registered associated person of such a member; and

  • 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.

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.

Approval and Recordkeeping

Registered Principal Approval
Correspondence need not be approved by a registered principal prior to use, but is subject to supervision and review requirements.

Each member shall establish written procedures that are appropriate to its business, size, structure and customers for 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 the FINRA upon request.

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.

Members must maintain a file of information concerning the source of any statistical table, chart, graph or other illustration used by the member in communications with the public.

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, each member must submit the material requested in a spot-check procedure within the time frame specified by the Department.

Content Standards Applicable to Institutional Sales Material and Correspondence
All institutional sales material and correspondence are subject to the content standards of Rule 2210.

All correspondence (which for purposes of this provision includes business cards and letterhead) must:

  • 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;

  • reflect any relationship between the member and any non-member or individual who is also named;

  • if it includes other names, reflect which products or services are being offered by the member.

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.

FINRA Conduct Rule 2212
Related Articles
  1. Term

    Public Goods & Free Riders

    A public good is an item whose consumption is determined by society, not individual consumers.
  2. Term

    What are the Different Types of Financial Advisors?

    There are two primary types of financial advisors: investment advisors and investment brokers, who work for broker-dealers.
  3. Economics

    What are Acquisition Costs?

    A company can recognize acquisition costs as those costs used to buy property and equipment.
  4. Professionals

    7 Tips for Year-End Financial Planning

    There is always a rush to get financial planning tasks done at year's end. Here are some tips to help ease the crunch.
  5. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  6. Professionals

    Top Tips for Helping Clients Through a Divorce

    It may take a delicate touch to properly assist clients who are going through a divorce. Here are some tips.
  7. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  8. Brokers

    How RIAs and Independent Broker-Dealers Differ

    There are many types of financial planners. Here we break down what sets RIAs apart from independent broker-dealers.
  9. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  10. Professionals

    How to Help Worried Clients See the Big Picture

    Advisors can have a tough time selling clients on the bigger picture, especially when the market is volatile. Here's how to manage expectations.
  1. Unicorn

    In the world of business, a unicorn is a company, usually a start-up ...
  2. Private Equity Real Estate

    A Definition of "Private Equity Real Estate" and how it applies ...
  3. Put-Call Parity

    A principle that defines the relationship between the price of ...
  4. Encumbrance

    A claim against a property by a party that is not the owner. ...
  5. EBITA

    Earnings before interest, taxes and amortization. To calculate ...
  6. Qualitative Analysis

    Securities analysis that uses subjective judgment based on nonquantifiable ...
  1. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>
  2. Can working capital be negative?

    Working capital can be negative if a company's current assets are less than its current liabilities. Working capital is calculated ... Read Full Answer >>
  3. How do hedge funds use equity options?

    With the growth in the size and number of hedge funds over the past decade, the interest in how these funds go about generating ... Read Full Answer >>
  4. Are Cafeteria plans taxable?

    Whether the benefits you receive through your employer-sponsored cafeteria plan are taxable depends entirely on which benefits ... Read Full Answer >>
  5. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  6. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!