FINRA Communication and Documentation 2 — Questions and Answers
Question 1: Under FINRA Rule 2210, which category of communication requires prior principal approval before use?
- Institutional communication
- Correspondence with fewer than 25 retail investors
- Retail communication (Correct answer)
- Internal memoranda
Correct answer: Retail communication
Retail communication must be approved by a registered principal before first use, as it reaches more than 25 retail investors in a 30-day period.
Question 2: A broker-dealer sends a promotional email to 30 retail investors. Under FINRA Rule 2210, this is classified as:
- Correspondence
- Institutional communication
- Retail communication (Correct answer)
- Internal communication
Correct answer: Retail communication
Any written communication distributed or made available to more than 25 retail investors within any 30-day period is classified as retail communication.
Question 3: Which FINRA rule specifically governs the supervision and review of correspondence and internal communications?
- FINRA Rule 3110 (Correct answer)
- FINRA Rule 2010
- FINRA Rule 4512
- FINRA Rule 2111
Correct answer: FINRA Rule 3110
FINRA Rule 3110 requires firms to establish and maintain supervisory systems, including review of correspondence and internal communications.
Question 4: When a registered representative wants to post on a personal social media page about their firm's investment products, FINRA generally treats this as:
- Internal communication exempt from review
- A form of public communication subject to firm supervision (Correct answer)
- An institutional communication requiring no approval
- Protected personal speech exempt from securities regulations
Correct answer: A form of public communication subject to firm supervision
Social media posts by registered representatives about firm products are considered public communications subject to FINRA content standards and supervisory review.
Question 5: Under FINRA rules, a testimonial used in retail communication must include which disclosure?
- The testimonial provider's net worth
- A statement that the testimonial may not be representative of other clients' experiences (Correct answer)
- The date the testimonial was originally given
- The specific account return achieved by the testimonial provider
Correct answer: A statement that the testimonial may not be representative of other clients' experiences
Testimonials must be accompanied by a disclosure that the experience described may not be representative of other clients' experiences.
Question 6: A firm uses a third-party content provider to create retail communications. Under FINRA rules, responsibility for compliance with communication standards rests with:
- The third-party content provider exclusively
- The firm itself, even when using third-party content (Correct answer)
- FINRA, which pre-approves third-party content
- The individual registered representative who distributes it
Correct answer: The firm itself, even when using third-party content
The member firm retains responsibility for the content of retail communications regardless of whether a third party created the material.
Question 7: Under FINRA Rule 2210, which statement about hypothetical performance results in retail communication is accurate?
- They are always prohibited
- They may be used if accompanied by required disclosures about assumptions and limitations (Correct answer)
- They require FINRA pre-approval in all cases
- They are only permitted for institutional investors
Correct answer: They may be used if accompanied by required disclosures about assumptions and limitations
Hypothetical performance results may be presented in retail communications if accompanied by appropriate disclosures about the assumptions, limitations, and speculative nature of the results.
FINRA Communication and Documentation 2
Under FINRA Rule 2210, which category of communication requires prior principal approval before use?