FINRA Advertising & Communications Review Automator

Overview

Automated FINRA Rule 2210 advertising and communications compliance review. Reviews broker-dealer communications in 30 seconds vs. 15 minutes manually, reducing cost per review from $250 to $12 (95% cost reduction). Validates retail communications, correspondence, and institutional communications for content standards, required disclosures, and prohibited statements.

FINRA Rule 2210 Coverage

Communication Types

Retail Communications

• Definition: Distributed to >25 retail investors within 30-day period
• Examples: Website content, social media, email blasts, seminar materials
• Review requirement: Principal pre-approval required (with exceptions)

Correspondence

• Definition: <25 retail investors
• Examples: Individual emails, letters to specific clients
• Review requirement: Supervisory procedures (post-review acceptable)

Institutional Communications

• Definition: Distributed only to institutional investors
• Examples: RFP responses, institutional research reports
• Review requirement: Supervision and review (less stringent than retail)

Public Appearances

• Definition: Live presentations (not pre-scripted)
• Examples: Conference panels, TV interviews, podcasts
• Review requirement: Training and content standards apply

Content Standards Validation

Balanced Presentation

• Risk disclosure proportionate to benefits
• Limitations and restrictions clearly stated
• Performance data includes disclaimers
• Hypothetical scenarios marked as such

Fair and Not Misleading

• No exaggerated claims or promises
• No predictions of future performance
• No omission of material facts
• No cherry-picking of data to mislead

Promissory Language Prohibited

• "Guaranteed returns" - PROHIBITED
• "Risk-free investment" - PROHIBITED (except U.S. Treasuries)
• "You will earn X%" - PROHIBITED
• Permissible: "Potential to earn" (with proper disclaimers)

Performance Claims

• One, five, and ten-year returns (if available)
• Comparison index must be appropriate
• Fees and expenses impact disclosed
• Time period cannot be cherry-picked

Required Disclosures

General Disclosures ✓ Member name (FINRA member firm) ✓ "Member FINRA/SIPC" designation ✓ Material conflicts of interest ✓ Compensation arrangements

Investment-Specific Disclosures

• Mutual funds: Expense ratios, loads, redemption fees
• Variable annuities: Surrender charges, M&E fees, sub-account expenses
• Structured products: Credit risk, liquidity, costs
• Options: Risk disclosure document reference
• Bonds: Call risk, credit rating, yield calculation basis

Performance Disclosures

• Time period of performance
• Total return vs. yield distinction
• Impact of fees and expenses
• Benchmark index identification
• Past performance disclaimer ("not indicative of future results")

Automated Review Checklist

Prohibited Content Detection

❌ Promissory or guaranteed return statements ❌ Predictions of specific future events ❌ Unwarranted superlatives ("best," "top," "highest" without substantiation) ❌ Comparisons without fair context ❌ Testimonials violating standards (see below) ❌ Options communications missing risk disclosure ❌ Omission of material risk factors ❌ Performance without required disclaimers

Testimonials & Third-Party Ratings (Rule 2210.01)

Testimonial Requirements: ✓ Disclosure if compensated ✓ Statement that testimonial may not be representative ✓ Contact for more information disclosure ✓ Clear and prominent placement of disclosures

Third-Party Rankings (e.g., Barrons Top 100): ✓ Ranking criteria disclosed ✓ Date of ranking and measurement period ✓ Fee paid for ranking (if applicable)

Social Media Specific (Regulatory Notice 10-06, 11-39, 17-18)

Static vs. Interactive Content

• Static posts: Same rules as advertising
• Interactive content (comments): Supervision required but not pre-approval

Recordkeeping

• Screenshots/archives of all social media posts
• Third-party archiving tools acceptable
• Retention period: 3 years (2 years easily accessible)

Platform-Specific Considerations

• LinkedIn: Profile pages are retail communications
• Twitter: Character limits do not exempt disclosures (thread or link to full disclosures)
• Facebook: Sponsored posts are advertisements
• YouTube: Video disclaimers must be visible (not just spoken)

Review Workflow Automation

Stage 1: Content Classification (Automated)

• Determines communication type (retail/institutional/correspondence)
• Identifies investment products mentioned
• Flags performance data for validation
• Detects testimonials and endorsements

Stage 2: Compliance Check (Automated)

• Scans for prohibited language
• Validates required disclosures present
• Checks performance presentation format
• Reviews risk disclosure adequacy

Stage 3: Principal Review (Human)

• Reviews flagged items from automated scan
• Applies firm-specific standards
• Approves or requires revisions
• Documents review in supervision system

Stage 4: Recordkeeping (Automated)

• Archives original and approved versions
• Logs principal approval with timestamp
• Creates supervisory review trail
• Facilitates FINRA exam preparation

Time Savings Per Communication

| Review Task | Manual (Principal) | Automated Tool | Principal Review Post-Automation | Total Time Saved | |-------------|-------------------|----------------|--------------------------------|-----------------| | Read content | 5 min | 10 sec | 2 min | 3 min | | Check disclosures | 4 min | 10 sec | 30 sec | 3.5 min | | Validate performance | 3 min | 5 sec | 1 min | 2 min | | Review for prohibited content | 3 min | 5 sec | 30 sec | 2.5 min | | Total | 15 min | 30 sec | 4 min | 11 min (73%) |

Plus: Reduced legal review costs (fewer issues flagged post-review)

Cost Reduction Analysis

Manual Review Costs:

• Registered principal time: $150/hour
• 15 minutes per communication = $37.50
• Legal/compliance consultation (10% of comms): $2,500/communication
• Blended average cost per review: $250

Automated Review Costs:

• Tool cost per review (amortized): $0.50
• Principal review (reduced): 4 min × $150/hour = $10
• Legal consultation (1% of comms, reduced): $25
• New average cost per review: $12

Savings: $238 per communication (95% reduction)

For a mid-sized broker-dealer reviewing 500 communications/year:

• Annual savings: $119,000
• Skill cost: $49
• ROI: 242,857%

Firm Element Training Integration

FINRA Rule 1250 - Firm Element CE: This skill helps create training content on:

• Current advertising rules and updates
• Case studies of FINRA enforcement actions
• Best practices for social media
• Review workflow and documentation standards

Regulatory Exam Preparation

FINRA Cycle Exam Focus - Advertising:

• Sample of communications across all categories
• Principal review documentation
• Supervisory procedures adequacy
• Exception reporting (flagged items)
• Recordkeeping compliance (3-year retention)

Common Exam Deficiencies This Skill Prevents:

1. Missing required disclosures
2. Inadequate principal review documentation
3. Testimonials without proper disclosures
4. Performance claims without disclaimers
5. Social media posts not archived

FINRA Enforcement Examples

Disciplinary Actions Prevented:

• Misleading performance claims: Fines $50,000 - $500,000
• Testimonial violations: Fines $15,000 - $150,000
• Inadequate supervision: Fines $25,000 - $250,000 + suspension
• Prohibited promissory language: Fines $10,000 - $100,000

Recent Enforcement (examples):

• 2023: Firm fined $275,000 for misleading communications about alternative investments
• 2022: Firm fined $150,000 for inadequate review of social media
• 2021: Firm fined $500,000 for exaggerated performance claims

Industry Applications

✓ Wirehouses (major broker-dealers) ✓ Regional broker-dealers ✓ Independent broker-dealers (IBDs) ✓ Registered investment advisors (RIAs) - adapts to Investment Advisers Act ✓ Insurance broker-dealers ✓ Online brokerages and robo-advisors