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.


Political Contributions

Related Articles
  1. ETFs & Mutual Funds

    Picking Top-Quality Hedge Funds

    Narrowing down your choices is the first step to finding a winning fund.
  2. Markets

    FINRA: How It Protects Investors

    Find out the history of FINRA, and how it's organized to monitor the markets and protect investors.
  3. Financial Advisor

    SEC's CARDS Plan Creates Controversy for Brokers

    The securities industry isn't happy with the hand it may be dealt with the SEC's proposed CARDS rules.
  4. Financial Advisor

    Why Financial Advisor Background Checks Are Vital

    An alliance of public interest groups is pressuring FINRA to broaden its BrokerCheck tool.
  5. Financial Advisor

    Robo-Advisors Face Regulatory Scrutiny

    FINRA and other regulators are starting to put robo-advisors under a microscope. Here's what they are focusing on.
  6. Investing

    Deferred Tax Liability

    Deferred tax liability is a tax that has been assessed or is due for the current period, but has not yet been paid. The deferral arises because of timing differences between the accrual of the ...
  7. Personal Finance

    Don't Be Misled By Investment Advertising

    Investment companies and brokers want to sell. Unfortunately, this can result in promotional material that is not entirely frank, or far worse, truly misleading.
  8. Investing

    Understanding Deferred Income Tax

    Deferred income tax is a liability on a balance sheet that reflects income tax that is allocable to the current period, but has not yet been paid.
  9. Financial Advisor

    Expect FINRA to Ask These Culture Questions

    This month, FINRA kicks off its culture examinations for brokerage firms. Here's how to cram for the test.
  10. Markets

    Steps to Starting Up an Independent Broker Dealer

    Launching your own broker-dealer is a lot of work, but the potential payoff is great, both personally and financially.
Trading Center