Communications with Prospects and Customers - Standards Applicable to Public Communications, Advertisements and Sales Literature



Standards Applicable to All Public Communications

  • All member communications with the public shall be based on principles of fair dealing and good faith, must be fair and balanced, and must provide a sound basis for evaluating the facts in regard to any particular security or type of security, industry or service. No member may omit any material fact or qualification if the omission, in the light of the context of the material presented, would cause the communications to be misleading.

  • No member may make any false, exaggerated, unwarranted or misleading statement or claim in any communication with the public. No member may publish, circulate or distribute any public communication that the member knows or has reason to know contains any untrue statement of a material fact or is otherwise false or misleading.

  • Information may be placed in a legend or footnote only in the event that such placement would not inhibit an investor's understanding of the communication.

  • Communications with the public may not predict or project performance, imply that past performance will recur or make any exaggerated or unwarranted claim, opinion or forecast. A hypothetical illustration of a mathematical principle is permitted, provided that it does not predict or project the performance of an investment or investment strategy.

  • If any testimonial in a communication with the public concerns a technical aspect of investing, the person making the testimonial must have the knowledge and experience to form a valid opinion.


Standards Applicable to Advertisements and Sales Literature
Advertisements or sales literature providing any testimonial concerning the investment advice or investment performance of a member or its products must prominently disclose the following:

  • The fact that the testimonial may not be representative of the experiences of other clients
  • The fact that the testimonial is no guarantee of future performance or success
  • If more than a nominal sum is paid, the fact that it is a paid testimonial

Any comparison in advertisements or sales literature between investments or services must disclose all material differences between them, including (as applicable) investment objectives, costs and expenses, liquidity, safety, guarantees or insurance, fluctuation of principal or return, and tax features.

All advertisements and sales literature 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.
  • reflect which products or services are being offered by the member if it includes other names.

Recommendations
When making investment recommendations within advertisements or sales literature, the member must have a reasonable basis for the recommendation and must disclose (where applicable) any of the following:

  • That at the time the advertisement or sales literature was published, the member was making a market in the securities being recommended, or in the underlying security if the recommended security is an option or security future, or that the member or associated persons will sell to or buy from customers on a principal basis

  • That the member and/or its officers or partners have a financial interest in any of the securities of the issuer whose securities are recommended, and the nature of the financial interest (including, without limitation, whether it consists of any option, right, warrant, future, long or short position), unless the extent of the financial interest is nominal.

  • That the member was manager or co-manager of a public offering of any securities of the recommended issuer within the past 12 months

Communications About Variable Life and Variable Annuities
IM-2210-2 released the following guidelines for advertisements and sales literature about variable products:

  • Material should not imply or represent that these are liquid or short-term investments.

  • Material should not imply or represent that either the contract itself or any underlying account is a mutual fund (since there are significant differences between special accounts and mutual funds).

  • Material should not imply that any of the guarantees associated with a variable contract represent or imply that these guarantees apply to investment return or the principal value of any of the separate accounts.

  • Material must clearly indicate that the product being discussed is an insurance product, and must clearly describe the policy or annuity.

Use of Rankings in Investment Company Sales Literature
Members may not use investment company rankings in any advertisement or item of sales literature other than rankings created and published by ranking entities or rankings created by an investment company or an investment company affiliate but based on the performance measurements of a ranking entity. IM-2210-3 released guidelines for mutual fund advertisements and sales literature that refer to such rankings. 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 prominently disclose:

  • The name of the category (e.g., growth)
  • The number of investment companies or, if applicable, investment company families in the category
  • The name of the ranking entity and, if applicable, the fact that the investment company or an affiliate created the category or subcategory
  • The length of the period (or the first day of the period) and its ending date
  • The criteria on which the ranking is based (e.g. total return, risk-adjusted performance)
FINRA Conduct Rule 2211
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