FINRA Files Proposed Amendments to Communications Rules

by Goodwin
Contact

FINRA filed with the SEC proposed amendments to FINRA Rule 2210, related to communications with the public, and FINRA Rule 2214, which sets forth requirements for the use of investment analysis tools (the “Amendments”).  FINRA Rules 2210 and 2214 became effective on February 4, 2013 in connection with FINRA’s adoption of comprehensive rules for communications with the public (the “Communications Rules”).  For a description of the Communications Rules, please refer to the April 24, 2012 Financial Services Alert (discussing the SEC’s approval of the Communications Rules), the July 17, 2012 Financial Services Alert (discussing the effective date for the Communications Rules), and the January 15, 2013 Financial Services Alert (discussing FINRA guidance on the Communications Rules).

Amendments to FINRA Rule 2210

FINRA Rule 2210 generally establishes content, approval, filing and other requirements with respect to communications with the public by FINRA member broker-dealers.  The Amendments include proposals to amend FINRA Rule 2210 as follows:

Exclusion of Certain Research Reports from Filing Requirements. FINRA proposes to exclude from the filing requirements of FINRA Rule 2210 research reports concerning only securities listed on a national securities exchange, other than research reports which must be filed pursuant to Section 24(b) of the Investment Company Act of 1940 (the “1940 Act”).  In explaining the Amendment, FINRA stated its belief that the likelihood of harm to investors resulting from the distribution of research reports concerning only exchange-listed securities is significantly lessened due to additional investor protection standards that apply to research reports, including (i) the comprehensive disclosure, content and analyst independence requirements of NASD 2711 and SEC Regulation Analyst Certification, and (ii) the liquidity and price discovery mechanisms in place for securities that are listed on a national securities exchange, which  reduces the risk that a research report could manipulate a security’s trading price. 

FINRA noted that Section 24(b) of the 1940 Act requires a registrant, and the underwriter for such registrant, to file all advertisements, pamphlets, circulars, form letters and other sales literature (including research reports) addressed to or intended for distribution to prospective investors with the SEC within 10 days of distribution of such material, and that Rule 24b-3 under the 1940 Act deems such material to be filed with the SEC upon its filing with FINRA.  Because of this separate filing requirement, FINRA does not believe it appropriate to include investment company research reports within the proposed exclusion.

Clarification with Respect to Free Writing Prospectuses. FINRA proposed to amend FINRA Rule 2210 to clarify that free writing prospectuses that are exempt from filing with the SEC are not subject to the rule's filing or content standards.  FINRA explained that since the effective date of the Communications Rules there has been some confusion as to the applicability of the filing and content requirements of FINRA Rule 2210 to free writing prospectuses.  The Amendments clarify that (i) a free writing prospectus that is exempt from filing with the SEC pursuant to Securities Act Rule 433 is not subject to the filing requirements and content standards of FINRA Rule 2210, and (ii) that the filing and content requirements apply to free-writing prospectuses required to be filed with the SEC pursuant to Securities Act Rule 433(d)(1)(ii).

Amendments to FINRA Rule 2214

FINRA Rule 2214 generally establishes the requirements for FINRA member broker-dealers when making use of investment analysis tools.  FINRA is proposing to correct a mistaken cross-reference in the Rule by replacing a reference to FINRA Rule 2210(c)(3)(D) with the correct reference to FINRA Rule 2210(c)(3)(C), which relates to the filing requirement for any template for written reports produced by, or retail communications concerning, an investment analysis tool. 

Public Comment

FINRA’s filing with the SEC proposes that comments on the Amendments be submitted no later than 21 days after the SEC publishes the proposal in the Federal Register.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

Written by:

Goodwin
Contact
more
less

Goodwin on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.