Communications

There are 3 officially named types of communicating with the public; Correspondence, Retail Communications, and Institutional Communications. There is a fourth one that doesn’t really get mixed up with the others, and that is Internal Communications. Internal Communications are those that a broker dealer, or similar institution, send internally to its employees and associated persons. They are not designed to be seen by investors.

Correspondence and Retail Communications are generally the ones the tests will try hardest to mix you up and confuse you between. They are the closest together, and both deal with talking to normal regular investors.

Institutional communications

Institutional Communications are those written communications that are sent only to institutional investors. Prospects that would be banks, insurance companies, governmental bodies, and similar types of corporate persons. This does not include accredited investors which are basically just retail clients that are “wealthy”. If institutional communications are actually shown to retail clients, they need to be refiled, and monitored as retail communications at that point.

Correspondence

Correspondence is written communications with the public, that are sent to at most 25 persons in a 30-calendar-day period. You want to make sure you recognize that lots of phrases mean the same thing. At most 25, 25 or less, less than 26, all mean the same thing. Correspondence does not need preapproval like communications, but it will get spot-checked, as the firm decides.

Firms must have processes for handling correspondence, and train employees on it. All incoming mail will be opened prior to delivery to the representative to review all communications and correspondence. If you don’t want personal mail opened at the office, don’t have it sent to the office. The job of reviewing correspondence coming into the office, does not need to be handled by a registered person, provided they are properly trained. At most firms now, email is handled similarly, with all company email being seen by reviewers before, even if slightly, the employee gets it. Copies are also kept of all that would need to be kept.

Retail communications

Retail communications are written communications with the public that are sent to at least 26 persons in a 30-calendar-day period. Again, you want to make sure you recognize that lots of phrases mean the same thing. At least 26, 26 or more, more than 25, all mean the same thing.

If you are trying to determine if something would be classified as Correspondence or Retail Communications, you simply need to ask yourself, will more than 25 people see it in a 30-calendar-day period? A Billboard? Will more than 25 people see it in a 30-calendar-day period? If yes, then it would be considered Communications and have to be treated as such. If no, the billboard, the website, or similar, will not be seen by more than 25 people in a 30-calendar-day month, why exactly are you building the billboard there? Seems weird to pay for a billboard if fewer than 26 people will see it in a month. Yeah, Billboards would be Retail Communications.

There are some exceptions to what might look like retail communications, but are not by definition. If they don’t make any financial or investment recommendation and do not mention or promote a product or specific service of the firm. In that case they are not going to be considered retail communications. The most common examples would be;

• Advertisements regarding recruitment. They must accurately describe the position.
• Communications related to the broker dealer changing their name, or their primary mailing address, personal address, or email, change of ownership information, business structure offices, and things like that.
• Notifications and messages related to mergers or acquisitions involving another member firm.
• Communications simply identifying the firm’s stock exchange symbol, or any symbol of which the firm is a registered market maker in, or if it is simply stating that “the firm offers this symbol at this price”.
• Interactive forum communications are not filed as communications, although they are monitored.
• Documents that are SEC filed, are not communications. These would be things like tombstones, prospectuses, mutual fund profiles, and similar.
• Media press releases not disseminated to retail investors by the firm.
• Reprints of articles or reports issued by a publisher, provided that publisher is not related to the firm, is not the issuer of the securities being mentioned, and no one paid or requested the reprint be made.
• Simply listing types of investments are parts of listing products and services when advertising what the firm does.

All retail communications and correspondence must include the firm’s name. If there is a DBA, Doing Business As, or some other fictitious name that is commonly used, that is also included.

Digital messages

Sometimes, you will have to think about the situation, as there is no hard and fast rule. Emails, text messages, and similar systems definitely fit in this. Did you send the message, through whatever means, to more or less than 25 people in a 30-calendar-day period? Was it only sent to institutional investors? Those are the same questions that apply to new-tech messages as they did to snail mail and similar old-tech messages.

Interactive content refers to material, generally posted on social media or other digital forums, that can be edited or added to by viewers. It would include message boards and forums, but also anything posted that can be edited with as little as a like or comment. It does not have to be as interactive as it would appear by the name, if the viewer can’t comment, but could like/dislike the post, then that would make it interactive content. Broker dealers must establish, implement, maintain, and monitor a system to supervise it representatives who may use interactive content. In many firms, they simply ban posting non-approved materials on social media. Easy system.

Static content refers to material, generally posted on social media or other digital forum as well, but that can not be edited by anyone other than the original creator. Facebook header, or LinkedIn “about me” page would be examples of static content.

Hyperlinks to other content is permitted to be included on broker-dealers websites to independent third-party content, such as research reports, or other materials that say positive things about securities they are recommending or similar. This would make it advertising though, if the broker-dealer was involved in preparing the materials (entangled with it), or if somehow approved or otherwise endorsed or requested the content (adopted the material). If the hyperlink is to a site that doesn’t mention specific securities or investments, it is simply considered educational.

Third-party posts are posts made by customers or someone else not directly affiliated with the member firm. If these are posted on any forum, members site or social media sites, employees business sites or social media sites, or similar, these would not be considered advertisements, provided they did not get entangled or adopt the material as described above. We need to be careful, because if the firm or employee comments or likes the post, that would be them adopting the material, and then it is subject to the standard advertising rules.

Public appearances

These are when an employee associated with a broker-dealer participates in some live forum, such as TV, radio, online forum, public seminar, or similar situation that is generally unscripted. These are not communications, and do not need preapproval, but most firms will have rules, so check before you just go out and try and speak publicly on behalf of your firm. There are certain general rules with public appearances;

• Any recommended securities must meet the reasonable basis suitability before being recommended,
• If the person speaking has any financial interest or stake in the company or any derivatives of the security,
• Any material conflict of interest that the firm or the person speaking has and knows at the time of the event, and
• The firms themselves must establish rules, policies, and procedures for dealing with public appearances. Any script, slides, handouts, reports, or anything else similar will be considered retail communications and must be handled accordingly.

Telemarketing

Telemarketing is calling someone who isn’t expecting your call. It is not simply calling a client, or a prospect you’ve been working with, or friends, or anything like that.

For Telemarketing, all calls must be made between 8am and 9pm in the time zone of the person receiving the call, not making it. So when making calls, make sure to check where you are calling. Before calling, we need to due a check to make sure they are not on the do-not-call list. Either the national do-not-call or the company’s do-not-call list. Most likely your phone system has that built in, but, you do need to make sure before making calls. If a prospect asks to not be called again, we must put them on the company’s do-not-call list, within 30 days.

Companies must have a written procedure in place, and provide training to all associated persons, along with ways to monitor and show agents how to use the Do Not Call Lists. They must make sure that all associated persons are following all rules and regulations regarding telemarketing.

As alluded to earlier, there are exceptions. Calling people with a personal relationship, Family, Friends, things like that, do not need to be counted. We do not need to check the do-not-call list before calling them, and we can call them whenever we want. I will warn you, if you’re calling your friends at 3am their local time, and they aren’t expecting it, they may not stay your friends for long. These are the Personal Relationship Exemptions.

There are Business Relationship Exemptions as well. If we are the broker-dealer of record for the client, we can call them without checking the Do Not Call list. If the person has done some other type of transaction with us in the past 18 months, we also do not need to check the do-not-call list. Finally, if they prospect reached out and asked for contact, such as with a postcard, online form, or similar, then we have 3 months from the date of receipt of the request for contact, to reach out without needing to check the do-not-call list.