What You Need to Know
- Firms can post videos without filing them with FINRA if they don't recommend or promote a product or service of the firm.
- BDs can use hyperlinks to provide further information, as long as the original communication is fair and balanced.
- A broker-dealer may not include in a private placement communication a target return.
The Financial Industry Regulatory Authority has updated its frequently asked questions guidance concerning its advertising regulation to address videos posted online as well as hyperlinks in electronic communications as well as “targeted return” projections.
FINRA also explains how its ad rule is consistent with the Securities and Exchange Commission’s new marketing rule.
The broker-dealer self-regulator explains that a firm is not required to have a principal approve prior to use or file with FINRA a video posted online “that does not recommend or promote a product or service of the firm, provided that the firm supervises and reviews such videos.”
Another question probes whether broker-dealers are allowed to include in electronic communications hyperlinks to content that provides additional information related to the communication in a fair and balanced manner.
Yes, according to FINRA.
FINRA explains that “Rule 2210(d)(1)(A) requires firm communications, among other things, to be fair, balanced, and not to omit any material fact or qualification if the omission would cause the communication to be misleading.
“Consistent with these standards, a firm may rely on a hyperlink to provide additional information or explanations so long as the initial electronic communication that includes the link is itself fair and balanced,” it stated.
For instance, “a non-misleading electronic communication about opportunities in emerging markets could link to an additional explanation about the basis for a claim in the initial post as well as the risks associated with emerging markets investments,” FINRA said.
However, FINRA added, “a firm may not rely on linked explanations or disclosures to correct a communication that is, on its face false, misleading, exaggerated or promissory.”