Ads for investment company products, government securities, collateralized mortgage obligations (CMOs) and certificates of deposit (CDs) may not be misleading in whole or in part, according to FINRA guidelines. That sets a pretty high standard because the term "misleading" goes far beyond flat-out falsehood and we all know people sometimes hear what they want to hear. So the NASD lists the general factors it looks at:

  • context, especially in regard to balanced treatment of risks and potential benefits;

  • intended audience, because different levels of detail are appropriate for a broad, non-specialized audience versus, say, a limited target group of investment professionals; and

  • clarity, because, as the FINRA guidelines say, a "complex or overly technical explanation may be worse than too little information".

FINRA guidelines look at these specific elements as well:

  • claims of tax-free or tax-exempt returns, where tax liability is merely postponed or deferred, or the bonds in the fund are subject to state or local income tax even though they are free from federal income tax;

  • comparisons, which must have a clear purpose and provide a fair and balanced presentation, including such material differences as investment objectives, sales and management fees, liquidity, safety, guarantees or insurance, fluctuation of principal and/or return, and tax features;

  • predictions and projections, which are impossible in reality and are permitted under FINRA guidelines solely as hypothetical illustrations of mathematical principles.
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