An email sent to 25 prospects and the same email sent to 26 can require different approval procedures. Both must tell the truth.
Your email, website, and social-media activity can introduce investments, answer questions, and invite prospects to do business. As an agent, you represent a broker-dealer (BD), a firm that conducts securities transactions for customers or its own account, so those messages speak for the firm.
Email, website, and social-media communications must give investors reliable information before they decide, even when a message looks informal. Under §101 of the 1956 Uniform Securities Act, business communications connected with securities offers, purchases, or sales cannot deceive investors. The prohibition reaches fraudulent schemes, materially false statements, misleading omissions, and conduct that operates as fraud.
A material fact is information important to a reasonable investor's decision. You must not omit facts needed to avoid misleading investors in the circumstances. A statement can be literally accurate yet create a false impression because essential context is missing.
Common mistakes
- Treating exactly 25 recipients as retail communication distribution. The threshold is more than 25 within any 30-calendar-day period; 26 crosses it.
- Counting only website visitors who click. Making promotional material available publicly matters even if only 14 people read it.
- Treating an interactive post reaching 600 investors as unsupervised. The exception concerns preapproval; correspondence-style supervision and recordkeeping remain.
Bottom line
- Business communications cannot contain material falsehoods or misleading omissions, regardless of medium.
- Section 403 permits state advertising-filing requirements, except for exempt securities, exempt transactions, and federal covered securities; antifraud still applies.
- Correspondence reaches 25 or fewer retail investors within any 30-calendar-day period; retail communications reach more than 25.
- Static promotional retail communications generally require principal approval before the earlier of use or filing with FINRA.
Exam shortcut
Circle the audience count and distribution dates before looking at the platform name. Combine batches within the same 30-day window. When a stem mixes profiles and replies, classify each item separately. Look for the interactive exception only after identifying the audience category. Underline the specific obligation being tested: filing, principal approval, supervision, retention, or registration. Apply an exception only to the obligation it actually changes.
The full lesson (about 3,468 words, 23 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- G18
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