FINRA’s new offering communication rule, FINRA Rule 2210, will become effective on February 4, 2013.7 Rule 2210 will, among other things, restructure FINRA’s current communications categories and require that a variety of “retail communications” relating to registered structured products be filed with FINRA.8
In anticipation of the effective date, FINRA recently posted a set of questions and answers about Rule 2210. Several of these Q&As directly answer questions that have been asked by participants in the structured products market. The Q&A may be found on FINRA’s website at the following link: http://www.finra.org/Industry/Issues/Advertising/P197604
What Is a Structured Product?
FINRA refused to submit to the temptation to define “structured product” for purposes of the communications rules. Instead, FINRA recognized the impossibility of providing an exhaustive list, setting forth a few typical examples: exchange-traded notes, reverse convertibles, principal protection notes, and other that securities that include “embedded derivative-like features.”
The Q&A confirms FINRA’s position that the filing requirement is not intended to apply to issuer-prepared prospectuses, including issuer-prepared FWPs, that are filed with the SEC.
Effect on Existing Communications Materials
A variety of market participants intend to continue to use brochures and other materials relating to structured products that were initially created before new Rule 2210 was adopted. These brokers have asked whether these materials would need to be filed under the new rule (if not previously filed), and FINRA has answered that question in the affirmative. Accordingly, underwriters should review the assortment of marketing materials that they plan to continue to use, and arrange for filing as needed. Of course, if they have not done so already, it would be useful to review these materials to ensure that they are consistent with FINRA’s and the SEC’s guidance as to these documents, and that they remain factually accurate.
Firms may wish to begin the filing process before the February 4th effective date. If they choose to do so, the materials will be reviewed under the content standards of existing NASD Rule 2210, as opposed to the new rules. However, the content standards of new Rule 2210 would apply if the materials are used after the effective date.