The Financial Industry Regulatory Authority, Inc. (“FINRA”) has filed proposed rule changes with the SEC regarding member communications with the public. FINRA’s proposal is intended to revise how written communications with the public are categorized for purposes of determining compliance with FINRA’s related rules. The proposal would reduce the number of communication categories to three categories based on the intended audience as follows:
- “Institutional communication” would include any written (including electronic) communication that is distributed or made available only to institutional investors. “Institutional investor” generally would have the same definition as under current NASD Rules.
- “Retail communication” would include any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. “Retail investor” would include any person other than an institutional investor, regardless of whether the person has an account with the member.
- “Correspondence” would include any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period.
While the proposed rules would expand filing requirements for and exemptions from certain categories, existing requirements for and exclusions from regulatory requirements for communications will remain largely unchanged following the proposed recategorization. Among other changes, the proposed rules would also expand the filing requirements to include all retail communications concerning closed-end funds, including communications distributed after the fund’s initial public offering, as well as communications regarding government securities, collateralized mortgage obligations, and securities derived from or based on a single security, a basket of securities, an index, a commodity, a debt issuance or a foreign currency. The text of FINRA’s proposal is available here.