A registered rep sends a personalized email to 30 prospective clients recommending a bond fund. She thinks it's just correspondence, no principal approval needed. She's wrong. That email crossed the 25-person threshold. It's a retail communication. It needed pre-approval before she hit send. One number separates a routine email from a compliance violation: 25.
FINRA classifies every written or electronic communication into one of three categories. The category determines who must approve it, when it must be filed, and what content standards apply.
Correspondence is any written or electronic communication sent to 25 or fewer retail investors within any 30-calendar-day period. A personalized email to 18 clients recommending a mutual fund is correspondence. No principal pre-approval is required. But the firm must still supervise it, typically through sampling, lexicon-based surveillance, or spot-checking after the fact.
Retail communication is any written or electronic communication distributed to more than 25 retail investors within any 30-calendar-day period. This is the broadest category. Advertisements, form letters to 30 prospects, social media posts visible to the public, all retail communications.
Common mistakes
- Confusing the 25-person threshold direction. Correspondence is 25 or fewer. Retail communication is more than 25. Candidates pick "more than 25" for correspondence or "25 or more" for retail. The boundary is at 25, a message to exactly 25 people is correspondence. A message to 26 is retail.
- Applying the wrong filing timeline to new vs. established firms. New firms (first year) file before use, at least 10 business days prior. Established firms file within 10 business days after first use. The exam reverses these. Watch for "new member firm" in the stem.
- Thinking institutional communications are unregulated. No pre-approval is required, but firms must have written supervisory procedures and conduct spot-checking. Institutional communications still cannot be misleading. Candidates pick "exempt from all content standards", that is always wrong.
Bottom line
- 25 retail investors in 30 days is the dividing line, at or below is correspondence, above is retail communication
- Retail communications require principal pre-approval before first use; correspondence needs supervision but no pre-approval
- Institutional communications go only to institutional investors, no pre-approval, but firms must maintain written supervisory procedures
- New member firms file retail communications at least 10 business days before first use; established firms file within 10 business days after
Exam shortcut
When you see a number of recipients in the question stem, immediately classify: 25 or fewer is correspondence (no pre-approval), more than 25 is retail (pre-approval required). Do not overthink the medium (email, letter, blog, social media post) the classification depends on the recipient count, not the delivery channel. For filing questions, check two things: (1) Is the firm new or established? New means pre-use filing.
The full lesson (about 3,265 words, 22 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- A1
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