FINRA Rule 2210, titled "Communications with the Public," defines and regulates how member firms and their associated persons can communicate with the public about securities and investments. It aims to ensure that these communications are fair, balanced, and not misleading to investors.
Here are the key points about FINRA Rule 2210:
Types of Communications: The rule classifies communications into three categories:
Retail communications: These target retail investors, meaning individuals who aren't considered institutional investors.
Institutional communications: These target institutional investors, such as banks, insurance companies, or registered investment advisors.
Correspondence: This covers personal communications with individual customers, typically related to their accounts or specific investments.
Content Standards: The rule sets principles-based content standards for all communications, regardless of the category:
Fair dealing and good faith: Communications must be based on honesty and fairness, avoiding deceptive or misleading practices.
Fair and balanced: Information must be presented accurately and objectively, considering both positive and negative aspects.
Sound basis for evaluation: Information should be supported by credible evidence and analysis, allowing investors to make informed decisions.
Material facts and qualifications: All significant information and limitations about the investment or security must be disclosed to avoid misleading investors.
Prohibited Communication: The rule prohibits specific tactics within communications:
False, exaggerated, or misleading statements: This includes claims that cannot be substantiated or create unrealistic expectations.
Promissory claims: Guaranteeing specific performance or profits is strictly prohibited.
Untrue statements of material fact: Any inaccurate information can violate the rule.
Additional Requirements:
Approval and review: Member firms must have procedures to approve and review communications before being distributed.
Recordkeeping: Firms must maintain records of all communications for a specific period.
Filing requirements: Certain retail communications may need to be filed with FINRA.
Significance:
FINRA Rule 2210 plays a crucial role in protecting investors by ensuring fair and transparent communication in the financial markets.
It promotes informed investment decisions and helps maintain market integrity by combating deceptive practices.