The Financial Industry Regulatory Authority, Washington, says sales representatives for member firms should take care when using ghostwritten books and articles to market their services.
A rule established by one of FINRA’s predecessor organizations, the National Association of Securities Dealers, “prohibits false, misleading or exaggerated communications with the public and the omission of material facts or qualifications that would cause a communication to be misleading,” officials at FINRA, Washington, write in Regulatory Notice 08-27.
Some ghostwritten books, pamphlets and newspaper advice articles may violate that rule and other rules established by the NASD and FINRA’s other predecessor organization, the regulatory arm of the New York Stock Exchange, the FINRA officials warn.
FINRA member broker-dealers must supervise the communications of registered representatives, and those reps should disclose whether other individuals or entities have created publications for their use, the officials write.
If a FINRA member firm pays for a publication, article or interview featuring a rep or a rep’s byline on behalf of a rep, that communication must be clearly identified as an advertisement, the officials write.
The authorship and subsidy disclosure rules apply to:
- Pamphlets or hard-cover books about investment topics that can be bought with a rep’s name printed on the cover.