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Alright, picture this. You're a principal at a broker-dealer, and you've just sat down with your coffee. On your screen are three things waiting for your review. First, a draft of a new social media post about a hot market trend. Second, an email a rep sent to just one client. Third, a big, dense research report that's only going out to a handful of insurance companies.
Three different communications, three different audiences. And on the exam—and in real life—you have to know exactly how to supervise each one. Get it wrong, and you're looking at a serious FINRA violation. So today, we're going to make sure you get it right. We're talking about FINRA Rule 2210: supervising communications.
The whole point of this rule is to sort communications into different buckets based on who sees them. Think of it like sorting mail. You've got junk mail that goes to every house in the neighborhood. You've got a personal, handwritten letter that only goes to one person. And you have an internal business memo that only goes to other corporate offices. How you handle each one is totally different, right? Same idea here.
FINRA has three main buckets: Retail Communication, Correspondence, and Institutional Communication.
Let's start with the biggest one, the junk mail for the whole neighborhood. That's Retail Communication. The definition is simple: any written communication that goes out to more than 25 retail investors in a 30-day period. A retail investor is... well, pretty much anyone who isn't a big institution. It’s your average person investing for retirement. So, if you send a mass email, put up a new page on your firm's website, or post on social media... you're easily hitting more than 25 people. That makes it retail communication.
Because so many people will see it, this category has the highest level of scrutiny. It requires principal pre-approval. Before. It. Goes. Out. Someone with the right license has to review and sign off on it first. That's the big takeaway. More than 25 people? It needs a supervisor's approval *before* first use.
On top of that, most retail communications have to be filed with FINRA. Now, the timing depends. If your firm is brand new—in its first year—you have to file everything 10 business days *before* you use it. FINRA wants to keep a close eye on the new guys. If your firm is established, you generally file within 10 business days *after* you start using it. There are some exceptions for things like prospectuses, and some specific products like options or certain bond funds that always need pre-filing, but that’s the general rule.
Okay, so that's the big bucket. Now let's talk about that personal, handwritten letter. This is what FINRA calls Correspondence. This is any written communication that goes to 25 or fewer retail investors in a 30-day period. See the magic number? 25. More than 25 is retail, 25 or less is correspondence. This is your typical email to a client, a text message, a short note to a handful of people.
Because the audience is so small, the rule is less strict. Correspondence does not require pre-approval. You don't need a supervisor to sign off before you hit send. Instead, it's subject to principal post-review and supervision. This means the firm has policies in place to check these communications after the fact. Maybe they sample emails, or use software to flag certain keywords. The key is, the review happens *after*, not before. No filing with FINRA is required for correspondence, either.
So, we have Retail for the masses, and Correspondence for small groups. The third bucket is that internal business memo. This is Institutional Communication. The name says it all. This is any communication that's distributed *only* to institutional investors. The exam loves to test this definition. An institutional investor isn't just a rich person. It's a bank, an insurance company, a registered investment company... or any person or entity with total assets of at least $50 million. That fifty-million-dollar number is key.
If your communication is *only* going to this sophisticated audience, it's treated a lot like correspondence. It does not require principal pre-approval. It just needs to be supervised and subject to post-review, according to your firm's written procedures. And, like correspondence, no FINRA filing is needed.
So, the whole system really hinges on that first question: who is your audience?
Let's walk through it. A communication lands on your desk. Step one: Is the audience *only* institutional investors? If yes, you're done. It's Institutional Communication. Just needs post-review. If the answer is no, then it involves retail investors. So, step two: how many? Is it going to more than 25 retail investors in a 30-day window? If yes, it's Retail Communication. That means you need principal pre-approval before it goes out, and you have to think about filing it with FINRA. If no, it's going to 25 or fewer, then it's Correspondence. No pre-approval needed, just post-review.
Simple as that. Audience first, then the number.
Let's use the example from your study materials. A firm creates a new webpage about its advisory services. Okay, step one: who's the audience? Well, it's a public webpage, so anyone can see it. It’s definitely not *only* for institutional investors. So, step two: how many retail investors? It's on the public internet, so... potentially millions. That's clearly "more than 25." So, it's a Retail Communication. That means a principal has to approve it before the page goes live. And, for an established firm, it would likely need to be filed with FINRA within 10 business days of launch.
Now, a couple of other quick things. The rules also mention Public Appearances, like a seminar or a TV interview. If you're using a script or slides, those materials might need pre-approval depending on the firm's policy. But for the unscripted, off-the-cuff parts, it's generally subject to post-review. And of course, no matter what you're writing or saying, it all has to be fair and balanced. No exaggerated claims or misleading statements. That's the foundation for everything.
So where do people get tripped up? First, they mix up the approval rules. Just burn this into your memory: more than 25 people means more risk, so it needs review up front. Retail equals pre-approval. Twenty-five or less, and institutional, is lower risk. Correspondence and Institutional equal post-review.
Another trap is the filing requirements. Remember that new firms, in their first year, have that stricter *prior* filing rule for retail communications. Don't forget that detail.
And finally, that definition of an institutional investor. Don't just assume a wealthy individual or a successful family business qualifies. Unless they're one of those listed entities like a bank or an insurance company, they need to have at least $50 million in assets. If not, they're just another retail investor for the purposes of this rule.
Let's try a quick question. A rep at an established firm sends an identical email about a new bond fund to 18 of her individual clients over two weeks. What is this, and what's required? Well, the audience is 18 retail investors. That's 25 or fewer. So it's Correspondence. And correspondence requires... principal post-review. No pre-approval, no filing. Simple as that.
One more. A firm is in its second year. It creates a new online ad for a portfolio that will run on news websites. What's required? An online ad is available to everyone, so it's Retail Communication. That means it absolutely needs principal pre-approval. Now, what about filing? The firm is in its *second* year, so it's an existing firm. That means for a standard ad, it files with FINRA within 10 business days *after* first use.
See how that decision process works? Identify the audience, count the retail investors if you have them, and then apply the rule.
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So to recap, when you see a communication question, just think about sorting the mail. Is it a mass-market advertisement for everyone? That's Retail Communication. It needs pre-approval and probably a FINRA filing. Is it a personal note to a small group? That's Correspondence. Post-review is fine. Or is it a memo just for the big financial players? That's Institutional Communication. Also just post-review.
Get that sorting process down, and you'll be in great shape.
Alright, that's all for today. Keep up the great work. You've got this.