Sales Activities - Investment Company Names


A materially deceptive and misleading name of a fund includes:


Names Suggesting Guarantee or Approval by the United States Government
A name suggesting that the fund or the securities issued by it are guaranteed, sponsored, recommended or approved by the United States government or any United States government agency or instrumentality, including any name that uses the words "guaranteed" or "insured" or similar terms in conjunction with the words "United States" or "U.S. government".

Names Suggesting Investment in Certain Investments or Industries
A name suggesting that the fund focuses its investments in a particular type of investment or investments, or in investments in a particular industry or group of industries, unless:

  • The fund has adopted a policy to invest, under normal circumstances, at least 80% of the value of its assets in the particular type of investments, or in investments in the particular industry or industries, suggested by the fund's name; and

  • The fund has adopted a policy to provide the fund's shareholders with at least 60 days prior notice of any change in the policy.

Names Suggesting Investment in Certain Countries or Geographic Regions
A name suggesting that the fund focuses its investments in a particular country or geographic region, unless:

  • The fund has adopted a policy to invest, under normal circumstances, at least 80% of the value of its assets in investments that are economically tied to the particular country or geographic region suggested by its name;

  • The fund discloses in its prospectus the specific criteria used by the fund to select these investments; and

  • The fund adopts a policy to provide the fund's shareholders with at least 60 days' prior notice of any change in the policy.

Tax-Exempt Funds: A name suggesting that the fund's distributions are exempt from federal income tax or from both federal and state income tax, unless the fund has adopted a fundamental policy under section 8(b)(3) of the act:

  • To invest, under normal circumstances, at least 80% of the value of its assets in investments the income from which is exempt, as applicable, from federal income tax or from both federal and state income tax; or

  • To invest, under normal circumstances, its assets so that at least 80% of the income that it distributes will be exempt, as applicable, from federal income tax or from both federal and state income tax.

The deceptive and misleading definitions apply at the time the fund invests the assets. If, subsequent to an investment, these requirements are no longer met, the fund's future investments must be made in a manner that will bring the fund into compliance with those paragraphs.


Exam Tips and Tricks
Watch for this timing issue in exam questions - if the fund does not meet the criteria due to investment performance after the time of investment, the name is not considered misleading.

FINRA Conduct Rule 2420
Related Articles
  1. Mutual Funds & ETFs

    The 3 Best Downside Protection Equity Mutual Funds

    Learn how it is possible to profit in a bear market by owning the correct selection of mutual funds that provide downside protection and opportunity.
  2. Economics

    The 2007-08 Financial Crisis In Review

    Subprime lenders began filing for bankruptcy in 2007 -- more than 25 during February and March, alone.
  3. Home & Auto

    Rent-To-Own Homes: How The Process Works

    A rent-to-own agreement can benefit homebuyers with bad credit or insufficient funds for a down payment. Here’s how one works.
  4. Options & Futures

    What Does Quadruple Witching Mean?

    In a financial context, quadruple witching refers to the day on which contracts for stock index futures, index options, and single stock futures expire.
  5. Professionals

    Is A Stockbroker Career For You?

    Becoming a stockbroker requires a broad skill set and the willingness to put in long hours. But the rewards can be enormous.
  6. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  7. Economics

    How Warren Buffet Made Berkshire Hathaway A Winner

    Berkshire Fine Spinning Associated and Hathaway Manufacturing Company merged in 1955 to form Berkshire Hathaway.
  8. Stock Analysis

    Forest Laboratories: An Activist Investment Analysis

    Find out how patience and perseverance paid off big-time for billionaire activist Carl Icahn during his four-year fight with Forest Laboratories.
  9. Fundamental Analysis

    The Evolution of Obamacare Since Its Inception

    Find out whether the Patient Protection and Affordable Care Act, also known as Obamacare, has lived up to its lofty projections from 2010.
  10. Charts & Patterns

    How To Use Volume To Improve Your Trading

    The basic guidelines to analyzing volume may not apply in all situations, but overall, they can help direct entry and exit decisions.
RELATED TERMS
  1. Negative Interest Rate Policy (NIRP)

    A negative interest rate policy (NIRP) is an unconventional monetary ...
  2. Great Society

    Born in the turbulent sixties, the Great Society was President ...
  3. Tight Monetary Policy

    A course of action undertaken by the Federal Reserve to constrict ...
  4. Bankruptcy

    A legal proceeding involving a person or business that is unable ...
  5. Laissez Faire

    An economic theory from the 18th century that is strongly opposed ...
  6. Value Investing

    The strategy of selecting stocks that trade for less than their ...
RELATED FAQS
  1. What is arbitrage?

    Arbitrage is basically buying in one market and simultaneously selling in another, profiting from a temporary difference. ... Read Full Answer >>
  2. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  3. What is a derivative?

    A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset, ... Read Full Answer >>
  4. What is finance?

    "Finance" is a broad term that describes two related activities: the study of how money is managed and the actual process ... Read Full Answer >>
  5. What items are considered liquid assets?

    A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted ... Read Full Answer >>
  6. What is comparative advantage?

    Comparative advantage is an economic law that demonstrates the ways in which protectionism (mercantilism, at the time it ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center