CHAPTER 18 - COMMUNICATIONS Flashcards
(23 cards)
General rules for all public communication
Principles of fair dealing and good faith
Statement must be clear and not misleading
Communication must be fair and balanced
Omission of material facts now allowed
False, exaggerated, misleading statements not allowed
Past performance is not guaranteed
FINRA mandates that members must consider nature of person receiving the communication and need detail appropriate to the audience
Three categories of communication
Institutional
Retail
Correspondance
Institutional communication
Written or electronic communication that is sent to only Institutional
investors but does not include a members internal communication
These are Institutional investors:
- another member firm or RR
- bank
- savings and loan association
- insurance company
- employee benefit plan
- governmental entity or subdivision
- person acting on behalf of Institutional investor
- person or entity with $50M or more
Each firm must establish if they require principal approval of Institutional communication before use or allow for post-use approval
If prior approval is not a part of it, then need to have education and training on associated persons around Institutional communication
Retail Communication
Written or electronic communication that is distributed to MORE than 25 retail investors within any 30 day calendar day period
Copy of all retail communication must be filed with FINRA
- For new member firms (first year) the filing must occur at least 10 days before use
- For established firms, filing must happen within 10 days of use
Firms send a copy of communication to FINRA for filing as a record
Rules require that all retail communications receive principal approval before use or filing with FINRA
Correspondence
Correspondence is any written or electronic communication that is distributed to 25 OR FEWER retail investors within 30 calendar day period
Each firm must decide if it will require principal approval before use or just have post use approval
If BD does not require pre approval then it must have education and training
Social Media Communication
FINRA takes social media into account
Firms are required to monitor business related social media of all reps
Most static content like website or blog must be approved by principal before use and may be required to file with FINRA
No requirement to pre-approve individual posts in interactive online forums but most firms have policies
Reps may use social media to engage with existing and prospective clients
Static Content
Websites or blogs
**Requires approval from principal before use
Can I keep my logo as big as FINRAs logo?
No that would be misleading
Or saying that FINRA approves of my company
Telephone Consumer Protection Act of 1991
Cold calling of potential clients for the purpose of encouraging purchase of goods or services
Rules:
- Need to tell your name, company name, phone number and address
- Call only between 8am and 9pm on prospects time zone
- No calls to company or federal do-not-call lists
Exempt Calls
Made to parties that caller has established business relationship or from whom caller has received prior express permission
Made on behalf of tax-exempt nonprofit organization
Not made for a commercial purpose
Made for debt collection reasons
TCPA requires an organization that does telemarketing to:
Maintain do not call list for those that do not want to be called
institute a written policy on maintenance for do not call lists
train people on the list
ensure the reps acknowledge those that ask to not be called
ensure tele-markets do not call a prospect from the time of their do not call request
ensure do not call list is no more than 30 days old
Also need to check against national do not call list, check both
Updating Customer Accounts Records
Firms must send customer within 30 days of opening the account a copy of the record
Firm must include statement that customer mark corrections
If customer has changes, firm must send an updated record within 30 days of notice
Firms need to reconfirm info every 3 years
Change in employment and financial status are big ones, also investment objectives
Accountant statement show
All activity in account
Securities positions
Account balances
Account balance rules
cash balance is free credit that can be withdrawn on request
FINRA rules require that statements are sent quarterly (monthly for penny stocks)
Statements must tell customer to promptly report any discrepancies
Trade Confirmations
Customer MUST be sent the confirmation AT or BEFORE the completion of the transaction (SETTLEMENT DATE)
Includes:
Trade date
Account number
RR number
BOT or SLD
Number
Description
Yield
CUSIP
Price
Amount
Commission
Net amount
Capacity
Holding Customer Mail
You can hold mail for a customer as long as:
Member firm gets written instructions for how long to hold
Good to hold up to 3 months
Requests may be granted for longer than 3 months for safety
Member firm informs customer of alternate methods to receive info
Member firm must regularly check that customers instructions apply
When holding it, member firm must:
- communicate with customer in timely manner
- take actions to make sure mail is not tampered with
firm can decline holding mail
Regulation SP
Made by SEC for privacy of info, specifically:
- SS numbers
- account balances
- transaction history
- info collected through internet cookies
Firm Sharing NPI with unaffiliated third parties
Firm must notify customers and provide reasonable means to opt out, like:
- provide a form with check boxes and prepaid return envelope
- provide electronic means to opt out
- provide toll free numbers
Asking them to write a letter does not work
Privacy Notifications
Firms must provide customers with descriptions of privacy policies specifying what they collect and who they share it with
Firms must provide this privacy notice at the time the relationship is established and annually after that (for ongoing customers, one time just get it up front)
Safeguard Requirements
Financial institutions need to keep info safe and do a good job at it
Business Continuity Plan
BCP is required by FINRA and needs to address:
- Data backup and recovery
- Alternate communications between firm and customer AND firm and employees
- Other physical location of employees
- Communications with regulators
- Prompt customer access to funds and securities in event firm is unable to continue business
Firms must designate senior management person who is principal to approve, update, and conduct annual review of the plan
FINRA requires firms to provide names of 2 people who may be contracted in event of distruption
Rule of 2 people for BCP
Both must be associated persons
one must be a principal and part of senior management
firm has only 1 associated person, outside contact can be used like the attorney
firms must update this contract info no later than 30 days after changes
Firm must disclose to its customers how it will respond to events and must be made in writing to customers at time of account opening, posted on web, and mailed on request
