FINRA Revises Policy on Free Writing Prospectuses

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The Financial Industry Regulatory Authority recently issued Regulatory Notice 10-52, which states that any free-writing prospectus (FWP) distributed by a broker-dealer in a manner reasonably designed to lead to a “broad unrestricted dissemination” as described in Rule 433(d)(1)(ii) of the Securities Act of 1933, is subject to the provisions of NASD Rules 2210 and 2211. FINRA’s prior interpretation in 2006 had excluded such FWPs from the provisions of NASD Rules 2210 and 2211.

NASD Rules 2210 and 2211 establish standards for the content of communications with the public by broker-dealers and include principal review and filing requirements with FINRA. NASD Rule 2210(b)(1) requires a registered principal of the broker-dealer to review and approve each advertisement and item of sales literature before it is distributed. NASD Rule 2210(c)(2) requires that firms file advertisements and sales literature regarding securities of certain entities, such as registered investment companies and public direct participation programs, with FINRA within 10 business days of first use.

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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.

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