Section 1
Function 1: Seeks Business for the Broker-Dealer
Communications with the public
52 min read
· Lesson 1 of 2
About This Lesson
The course opens with FINRA Rule 2210, the rule that governs every word a broker-dealer or registered representative puts in front of the public, because nearly every question it generates turns on one decision: which of three categories does the communication fall into? Get the classification right, by counting the retail recipients in a 30-day window, and the approval, filing, and supervision answers follow almost automatically. Get it wrong and every downstream answer goes with it.
What you'll cover
- the three communication categories (retail, institutional, correspondence) and the 25-recipient line that separates them
- principal approval, FINRA filing windows, and record retention: who signs off, what gets filed and when, and how long records live
- product-specific rules for options, variable contracts, mutual funds, and research, plus seminars and social media
This is the first chapter of the course.
In this chapter
52 min · 14 concept checks
Section 1 of 3
~16 min · 6 concept checks
Communication Categories
Retail communication
More than 25 retail investors / 30 days
Principal pre-approval required
FINRA filing required (specified categories)
Highest scrutiny — widest audience
Institutional communication
Exclusively to institutional investors
No pre-approval required
No FINRA filing required
Firm must have supervisory procedures
Correspondence
25 or fewer retail investors / 30 days
No pre-approval required
No FINRA filing required
Subject to supervision and review
Who Qualifies as an Institutional Investor?
The definition matters because only a communication distributed exclusively to institutional investors counts as "institutional" and escapes the pre-approval requirement; a single retail recipient makes the entire communication retail. Under FINRA Rule 2210, institutional investors include:
Banks, savings institutions, and credit unions
Insurance companies
Registered investment companies (mutual funds, ETFs)
Investment advisers registered under the Advisers Act
Government entities and sovereign wealth funds
Employee benefit plans with at least $5 million in assets
FINRA member firms and their registered persons
Any person with total assets of at least $50 million
Critical trap: A communication sent to a mix of retail
and institutional investors is classified as retail communication — not institutional.
The institutional category requires the communication to be sent exclusively to institutional investors.
FINRA Rule 2210: The Three Communication Categories
The cards above gave you the three categories at a glance; here are the formal definitions, because precise wording is what the exam tests. The category determines who must approve a piece, whether it is filed with FINRA, and how it is supervised, and it turns on audience, not content. Count the retail recipients in a rolling 30-day window and the classification falls out:
Retail Communication
Any written or electronic communication distributed or made available to more than 25 retail investors within any 30-calendar-day period. Retail investors are any customer or prospect that is not an institution. Includes websites, print ads, brochures, and most social media posts.
Institutional Communication
Communications distributed exclusively to institutional investors (banks, insurance companies, registered investment companies, government entities, employee benefit plans with $5M+ in assets, and entities with $50M+ in total assets).
Correspondence
Written or electronic communication distributed or made available to 25 or fewer retail investors within any 30-calendar-day period. The 25-recipient threshold is the dividing line between correspondence and retail communication.
The 25-recipient line: an email to 26 retail prospects within 30 days is retail communication. The identical email to 24 retail prospects is correspondence. Same words, different rulebook; the threshold is recipients, not content.
Social Media: Static vs. Interactive Content
FINRA applies the three-category framework to social media. The key distinction is whether the content was pre-prepared or generated in real time.
Static content
Classified as: Retail communication
Firm website investment pages
Pre-written LinkedIn / Twitter posts
Blog posts, prepared slide decks
Pre-scripted seminar content
Principal pre-approval required
Interactive (real-time) content
Classified as: Correspondence
Live chat replies
Spontaneous responses to social posts
Real-time webinar Q&A
Text messages to individual clients
Supervision only — no pre-approval
Record retention: All communications — retail, institutional, and correspondence — must be retained for 3 years (2 years in an easily accessible location). This includes email, text messages, and social media posts.
Interactive: Classify That Communication
Score: 0 / 9
📱 Tap a chip to select it, then tap a bucket to place it.
Drag or tap each communication into the correct FINRA category
Retail
Any audience, or unclear who will see it
Institutional
Sent only to qualified institutional buyers
Correspondence
25 or fewer retail customers in 30 days
Concept Check
A registered representative sends an email to 18 of her retail clients about a new municipal bond fund. Three weeks later, she sends the same email to 12 different retail clients. How is this communication classified?
The 25-customer threshold for correspondence is cumulative over any 30-calendar-day period, not per-send. The rep sent to 18 clients, then 12 more within 30 days — totaling 30 unique retail investors in that window. This crosses the threshold and classifies the communication as retail communication, requiring principal pre-approval before use. The category is determined by the total reach over the 30-day window, not by whether each individual send stayed under 25.
Concept Check
A registered representative is sending an email to prospective clients describing a new product offering. The email goes out to 32 retail recipients during a single calendar month. Under FINRA Rule 2210, the email is best classified as
Retail communications under FINRA Rule 2210 are written or electronic communications distributed to more than 25 retail investors within any 30-calendar-day period. The 32-recipient email crosses the threshold and qualifies as retail communication. Retail communications require pre-use approval by a registered principal of the broker-dealer. Correspondence applies only when the recipient count is 25 or fewer in 30 days. Institutional communications go exclusively to institutional investors, not retail prospects. Private placement is a registration concept, not a Rule 2210 communication category.
Concept Check
A registered representative posts a comment on a public social media platform recommending a specific stock to followers. Under FINRA rules, this is most likely classified as:
Public social media posts that are broadly accessible to retail investors qualify as retail communication under FINRA Rule 2210. Retail communication is any written material distributed to more than 25 retail investors within any 30-day period. A public social media post visible to unlimited followers clearly meets this threshold. It must be approved by a registered principal before use. Correspondence is reserved for communications with 25 or fewer retail investors in a 30-day period.
Concept Check
A broker-dealer sends a detailed research report on a technology company exclusively to 40 pension funds, each with over $100 million in assets. Under FINRA Rule 2210, this communication is classified as:
Pension funds with over $5 million in assets qualify as institutional investors under FINRA Rule 2210. Because the report was sent exclusively to institutional investors, it is institutional communication — no principal pre-approval is required, though the firm must have supervisory procedures. The 25-person threshold is irrelevant here; the classification turns on who received the communication, not how many.
Concept Check
A broker-dealer wants to send a research report to 30 institutional clients. Under FINRA rules, this communication is classified as:
FINRA classifies communications into three categories based on audience. Institutional communication is distributed exclusively to institutional investors (banks, broker-dealers, registered investment companies, and others meeting the definition). The 25-person threshold triggers the retail communication category only when the audience includes retail investors. Because all 30 recipients here are institutional, the communication is institutional — which carries different, generally less restrictive, approval and filing requirements.
Concept Check
Before using a new virtual meeting platform for actual client meetings, a securities professional runs through a securities presentation with six family members as a system test. Under FINRA Rule 2210, this trial run is best characterized as
Communications to 25 or fewer retail recipients within any 30-calendar-day period qualify as correspondence under FINRA Rule 2210. Six family members fall well within the 25-recipient threshold for correspondence treatment. The communication is not outside Rule 2210 simply because it goes to family or because it is a trial run — the rule applies based on recipient count and audience type. Institutional communications go to institutional investors only, not retail family members. FINRA filing is not required for correspondence; only retail communications above the 25-recipient threshold trigger filing analysis.
Section 2 of 3
~16 min · 5 concept checks
Filing, Approval & Records
FINRA Filing Requirements by Communication Type
File before first use (10 business days prior)
File after first use (within 10 business days)
Public offerings (non-investment company)
Must file at least 10 business days before first use
Investment company communications (funds, ETFs)
File within 10 business days of first use
DPPs and real estate programs
Must file at least 10 business days before first use
Variable annuities and variable life insurance
File within 10 business days of first use
No filing required
Tombstone advertisements · Generic investor education · Institutional communications (generally)
Limited content or restricted audience eliminates the FINRA review obligation.
Limited content or restricted audience eliminates the FINRA review obligation.
New member firms: Must file ALL retail communications at least 10 business days before first use for the entire first year of FINRA membership.
Principal Approval: Who, When, and the 10-Business-Day Rule
Under FINRA Rule 2210, every retail communication must be reviewed and approved by a registered principal before use — or, for certain materials, within a specific window after first use. The identity of the approving principal matters.
| Communication Type | Who Must Approve | Timing |
|---|---|---|
| Standard retail communications (ads, website, email campaigns) | Any registered principal (Series 24) | Before first use |
| Options communications (retail) | Registered Options Principal (Series 4) or a general principal who has passed Series 4 | Before first use; firm must have approved options communication plan |
| Investment company (fund) communications | Registered principal who meets fund-specific qualifications | Before first use or within 10 business days of first use (filing applies) |
| Public offering retail communications (new issues) | Registered principal | File with FINRA at least 10 business days before first use |
| Correspondence (25 or fewer retail) | No pre-approval required — post-use review under firm supervisory procedures | Reviewed under supervisory system; spot-check acceptable |
Key distinction: The Series 24 (General Securities Principal)
is the standard approver for most retail communications. Options communications require a Series 4 principal
— a common exam trap. FINRA Rule 2210(b)(1)(A) permits firms to establish procedures allowing review
within 10 business days of first use for certain materials, but the default is pre-approval.
Record Retention: The 3-Year and 6-Year Rules
3 years
Communications records
Retail communications (ads, website, email blasts)
Correspondence (individual client letters/emails)
Institutional communications
Social media posts (all types)
First 2 years must be in an easily accessible location
6 years
Books and records
Blotters, ledgers, and order records
Customer account records
Trade confirmations and account statements
Partnership agreements and corporate records
Exam tip: The 3-year rule is the default for
communications. The 6-year rule covers books and records (the accounting backbone of the firm).
When a question mentions "communications" → think 3 years.
When it says "customer account records," "blotters," or "order tickets" → think 6 years.
Seminars, Webinars, and Public Appearances
Put a registered representative on a stage and the classification question follows them up there. What matters is whether the words were prepared in advance or spoken in the moment:
- Pre-scripted seminar scripts and slide decks are retail communication; a principal must approve them before the event.
- Spontaneous Q&A during the seminar is treated as correspondence: subject to firm supervision, but no pre-approval.
- Educational seminars with no product promotion still live under Rule 2210; the prohibition on misleading content applies no matter how the event is labeled.
That last point is the exam's favorite angle here. A seminar marketed as "educational" but built to sell a specific product is a classic FINRA red flag, and the test writes fact patterns around it. The substance of the communication, not its label, determines the regulatory treatment.
Principal Approval and FINRA Filing Requirements
Two separate gates, and the exam loves to blur them: approval happens inside the firm before a communication is used; filing is what goes to FINRA afterward (or, in a few cases, before). The category you learned in Section 1 drives both.
Principal Approval Rules
| Communication Type | Pre-Use Principal Approval Required? |
|---|---|
| Retail communication | Yes — principal must approve before first use |
| Institutional communication | No pre-approval; firm must establish written supervision procedures |
| Correspondence | No pre-approval; firm must establish written supervision and review |
FINRA Filing: The Three Buckets
Pre-filed (10 business days before first use): First-year firm retail communications. Retail communications about bond mutual funds with volatility ratings. Retail communications concerning security futures.
Post-filed (within 10 business days of first use): Retail communications for registered investment companies (mutual funds, variable contracts, UITs). Retail communications for direct participation programs, public CMOs, and structured products.
Excluded from filing: Communications that only identify a security or that recommend a previously-filed registered investment company. Communications that solely identify the firm or its branch offices.
SEC vs. FINRA: communications are never submitted to the SEC for review or approval; they are filed with FINRA. And filing is not blessing: FINRA reviews for Rule 2210 compliance but does not pre-approve communications. If an answer choice says the SEC "approved" an advertisement, it is wrong twice over.
The Three Traps FINRA Sets on This Topic
Trap 1: "institutional" requires exclusivity. Send a communication to institutional investors AND a single retail investor, and you have retail communication. "Exclusively" is the operative word.
Trap 2: tombstones are retail communications. A tombstone ad runs in the Wall Street Journal where anyone can read it, so it is retail communication even though it carries only basic factual information. The twist: tombstones do not require FINRA pre-filing; their limited content exempts them.
Trap 3: the 25-customer threshold is cumulative across 30 days. The same email to 20 clients today and 10 different clients tomorrow is 30 recipients in the window, which makes it retail communication. Count across the period, not per send.
Trap 1: "institutional" requires exclusivity. Send a communication to institutional investors AND a single retail investor, and you have retail communication. "Exclusively" is the operative word.
Trap 2: tombstones are retail communications. A tombstone ad runs in the Wall Street Journal where anyone can read it, so it is retail communication even though it carries only basic factual information. The twist: tombstones do not require FINRA pre-filing; their limited content exempts them.
Trap 3: the 25-customer threshold is cumulative across 30 days. The same email to 20 clients today and 10 different clients tomorrow is 30 recipients in the window, which makes it retail communication. Count across the period, not per send.
Concept Check
A new FINRA member firm publishes a retail advertisement promoting its new brokerage services. What is the filing requirement for this communication?
New FINRA member firms must file all retail communications at least 10 business days before first use for the entire first year of membership — a stricter standard than applies to established firms. This pre-use filing requirement applies regardless of the content type. After the first year, standard filing requirements apply (which vary by content — some require pre-use filing, some require post-use filing within 10 business days).
Concept Check
A retail communication prepared by a newly registered rep must be reviewed and approved by a registered principal:
FINRA Rule 2210 requires retail communications to be approved by a registered principal before use. This requirement applies no matter how long the representative has been registered. The special first-year obligation belongs to new FINRA member firms, which must file their retail communications with FINRA at least 10 business days before first use during their first year of membership. Correspondence (to 25 or fewer retail investors) may be reviewed on a spot-check basis after use, but retail communications require principal sign-off before distribution.
Concept Check
When a securities professional prepares a PowerPoint slide presentation to be delivered at a live seminar for a group of invited institutional clients, the slides may need to be
Institutional communications do not require pre-use principal approval, but member firms must establish written supervision procedures including review by a principal as the firm determines appropriate. The presentation may need principal review under those procedures even though formal pre-use approval is not mandated by Rule 2210. FINRA does not approve communications in writing; it reviews them. The SEC plays no role in communication review or approval. Combined FINRA and SEC pre-approval is not a real process. The principal-review answer captures the actual institutional communication supervision framework.
Concept Check
Under FINRA rules, which of the following social media activities by a registered representative would be classified as retail communication and require principal pre-approval?
Static content — prepared blog posts, pre-written website content, pre-scripted social media posts — is treated as retail communication and requires principal pre-approval. Interactive or real-time communications (live chat, spontaneous replies) are treated as correspondence. A direct message to a single institutional client is institutional communication. Live webinar Q&A is correspondence.
Concept Check
FINRA Rule 2210 sets filing requirements: some communications must be pre-filed, some post-filed, and some are excluded from filing entirely. Which communication would be EXCLUDED from FINRA filing?
Communications that do no more than identify a national securities exchange symbol of the member or identify a security for which the member is a registered market maker are excluded from FINRA filing. These minimal-content communications do not contain investment recommendations or detailed product descriptions, so the regulatory concerns motivating filing requirements do not apply. Communications promoting services, recommending specific funds, or recommending related products like ETFs from a fund family carry investment content and are subject to filing requirements.
Section 3 of 3
~10 min · 3 concept checks
Product-Specific Rules & Research
Product-Specific Communication Rules — What the Exam Tests Most
Three product areas carry their own communication rules on top of the general Rule 2210 framework, and each one hides a detail the exam likes to pull out:
Options: retail options communications run through a separate gate. Every retail options communication needs advance approval from a Registered Options Principal (the Series 4), and any options communication used before the ODD is delivered must also be submitted to FINRA at least 10 calendar days before first use.
Variable annuities and variable life insurance: sales literature must clearly explain the insurance aspects, surrender charges, and the long-term nature of the investment. Performance projections beyond the assumed interest rate are prohibited.
Municipal fund securities (529 plans): retail communications need plain-language explanations of fees, investment risk, and the tax consequences of non-qualified withdrawals.
Three product areas carry their own communication rules on top of the general Rule 2210 framework, and each one hides a detail the exam likes to pull out:
Options: retail options communications run through a separate gate. Every retail options communication needs advance approval from a Registered Options Principal (the Series 4), and any options communication used before the ODD is delivered must also be submitted to FINRA at least 10 calendar days before first use.
Variable annuities and variable life insurance: sales literature must clearly explain the insurance aspects, surrender charges, and the long-term nature of the investment. Performance projections beyond the assumed interest rate are prohibited.
Municipal fund securities (529 plans): retail communications need plain-language explanations of fees, investment risk, and the tax consequences of non-qualified withdrawals.
Independent Research and the Product-Specific Fine Print
Independent Third-Party Research
A registered representative may hand clients research written by an independent analyst, but the attribution rules are unforgiving. Reproducing an outside report on the firm's letterhead without naming the actual author misleads the recipient about whose analysis it is, and that is exactly what the rule prohibits.
The rule: independent research may be distributed to clients only when the source is clearly disclosed. A representative cannot rebadge another firm's research as the broker-dealer's own work product, and it makes no difference whether the recipients are a select few or the general public.
More Product Rules: CMOs, Fund Performance, and Rankings
- CMOs: Retail communications must use the term "Collateralized Mortgage Obligation" (not abbreviations only) and explain that CMOs are not direct U.S. government obligations.
- Mutual funds: Performance data must be standardized: 1-year, 5-year, and 10-year average annual total returns, current to the most recent calendar quarter end.
- Mutual fund rankings: Rankings published by the firm itself (rather than by an independent ranking organization) require pre-filing with FINRA 10 business days before first use.
- Variable contracts: Performance illustrations must reflect all charges, fees, and expenses to fairly represent realistic investor outcomes.
Webinars and social media: Rule 2210 follows the communication onto any platform. The recipient count in the 30-day window still drives the category: a live webinar to 50 retail prospects is retail communication; the same webinar to 20 retail prospects is correspondence.
Concept Check
Collateralized mortgage obligations (CMOs) are a type of asset-backed security commonly described in retail communications. What types of underlying assets typically back the CMOs that broker-dealers discuss in such communications?
CMOs are backed by pools of mortgages, frequently mortgage-backed securities issued by Ginnie Mae, Fannie Mae, and Freddie Mac. The underlying assets are mortgage paper, not direct real estate ownership. Stocks, bonds, mutual funds, and ETFs are not the standard CMO collateral. Despite the agency-issued mortgage backing, CMO retail communications must clearly state that CMOs themselves are not direct U.S. government obligations — the agency guarantees on the underlying mortgages do not extend to the CMO security structure built on top of them.
Concept Check
An associated person reproduces a research report originally prepared by an independent third-party analyst on the broker-dealer’s letterhead. The reproduction makes no mention of the actual author and is forwarded to a select group of clients. The action taken in this scenario is
Reproducing independent research on the broker-dealer’s letterhead without disclosing the actual author misattributes the work and is not permitted under FINRA rules. The misattribution misleads recipients about the source of the analysis. Principal approval, recipient size limitation, and prior filing of the research are not curative — the misrepresentation of authorship is the violation regardless of who reviewed it or who received it. Independent research may be distributed only when the actual source is clearly disclosed to the recipients receiving the material.
Concept Check
All of the following statements about a red herring (preliminary prospectus) are accurate EXCEPT
A registered representative may NOT send a research report along with a red herring during the cooling-off period. The preliminary prospectus is the only sales material permitted before the effective date of the registration statement. Including additional sales material like research reports would violate the Securities Act of 1933 prohibitions on selling activities before effective registration. The other statements are accurate: the final price is not in the red herring, additional information may be added, and the red herring is used to gather indications of interest before the security may legally be sold.
Summary
Exam Essentials — high-yield review
Chapter Summary
Ch 1 Exam Essentials — Communications with the Public
- Three categories: Correspondence (≤25 retail investors in 30 days), retail communication (>25 retail investors), institutional communication (exclusively institutional investors).
- Prior approval: Retail communications require principal approval before use. Separately, new FINRA member firms must file retail communications with FINRA at least 10 business days before first use during their first year of membership.
- Social media: A public post visible to unlimited followers = retail communication. A direct message to one customer = correspondence.
- Filing with FINRA: Certain retail communications (new investment company ads, public offering materials) must be filed with FINRA within 10 business days of first use, or in advance for certain categories.
- Recordkeeping: All communications must be retained for 3 years (first 2 years in an accessible location). Correspondence is subject to spot-check review; retail communications require pre-approval.
Communications Exam Traps — Consolidated
Twelve ways the exam tries to trip you on communications. Scan this list the night before; every one of these has decided a real question:
1. 25-recipient threshold separates correspondence from retail communication. 26+ retail recipients in 30 days = retail communication. 25 or fewer = correspondence.
2. Retail communications require pre-use principal approval. Institutional communications and correspondence do NOT require pre-approval but do require written supervision procedures.
3. Communications are filed with FINRA, NOT the SEC. The SEC does not review or approve advertising. FINRA reviews for Rule 2210 compliance.
4. Mutual fund retail communications are post-filed within 10 business days. First-year firm retail communications are pre-filed 10 business days before first use.
5. Bond fund volatility rating retail communications must be pre-filed. Security futures retail communications are pre-filed. Most other retail communications are post-filed.
6. Independent research reports must disclose the actual author. Cannot rebadge another firm’s research as the broker-dealer’s own work product.
7. Communications that only identify a security are excluded from filing. Tombstone-style ads identifying only the security or firm branch offices do not require FINRA filing.
8. Mutual fund performance must be 1, 5, and 10 year average annual total return. Standardized to the most recent calendar quarter end.
9. Firm-published mutual fund rankings require pre-filing 10 business days before first use. Rankings from independent organizations have different rules.
10. Institutional investors include $50M+ entities. Banks, insurance companies, registered investment companies, government entities, and employee benefit plans with $5M+ in assets.
11. Webinars and social media follow Rule 2210. Recipient count drives the category just like print or email.
12. Predictions of investment performance are prohibited. Past performance must include the standard disclaimer that past performance does not guarantee future results.
Twelve ways the exam tries to trip you on communications. Scan this list the night before; every one of these has decided a real question:
1. 25-recipient threshold separates correspondence from retail communication. 26+ retail recipients in 30 days = retail communication. 25 or fewer = correspondence.
2. Retail communications require pre-use principal approval. Institutional communications and correspondence do NOT require pre-approval but do require written supervision procedures.
3. Communications are filed with FINRA, NOT the SEC. The SEC does not review or approve advertising. FINRA reviews for Rule 2210 compliance.
4. Mutual fund retail communications are post-filed within 10 business days. First-year firm retail communications are pre-filed 10 business days before first use.
5. Bond fund volatility rating retail communications must be pre-filed. Security futures retail communications are pre-filed. Most other retail communications are post-filed.
6. Independent research reports must disclose the actual author. Cannot rebadge another firm’s research as the broker-dealer’s own work product.
7. Communications that only identify a security are excluded from filing. Tombstone-style ads identifying only the security or firm branch offices do not require FINRA filing.
8. Mutual fund performance must be 1, 5, and 10 year average annual total return. Standardized to the most recent calendar quarter end.
9. Firm-published mutual fund rankings require pre-filing 10 business days before first use. Rankings from independent organizations have different rules.
10. Institutional investors include $50M+ entities. Banks, insurance companies, registered investment companies, government entities, and employee benefit plans with $5M+ in assets.
11. Webinars and social media follow Rule 2210. Recipient count drives the category just like print or email.
12. Predictions of investment performance are prohibited. Past performance must include the standard disclaimer that past performance does not guarantee future results.
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Practice Questions
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