FINRA Proposes Changes to Retail Communications Rules

Investment Management Update

Date: June 02, 2015

On May 18, 2015, FINRA proposed changes to several of its rules governing communications with the public, including Rule 2210 (Communications with the Public), Rule 2214 (Requirements for the Use of Investment Analysis Tools) and Rule 2213 (Requirements for the Use of Bond Mutual Fund Volatility Ratings). Comments on the proposed rule revisions are due by July 2, 2015.

Following is a summary of the proposed rule changes.

New Firm Communications

Currently, new FINRA member firms are required to file retail communications with FINRA 10 business days prior to first use with the public. The proposed revisions will allow firms to file these communications within 10 business days of first use.

Filing of Ranking & Performance Backup Materials

Firms that use fund ranking or performance comparisons in retail communications are currently required to provide FINRA a copy of the backup material for such comparison. As proposed, the new rules would eliminate this filing requirement and firms would be simply be required to maintain backup material internally.

Mutual Fund Shareholder Reports

Mutual funds must currently submit the management discussion of fund performance section of a shareholder report to FINRA for review if the report is distributed or made available to prospective investors. The revised rules would eliminate this filing obligation if the report is filed with the SEC.

Generic Investment Company Communications

Retail communications concerning registered investment companies currently must be filed with FINRA within 10 business days of first use. The proposed rules will exempt from this filing requirement generic communications intended to educate investors about mutual funds in general but that do not promote a particular fund or fund family.

Investment Analysis Tools

Firms that offer interactive technological tools that allow prospective investors to produce investment simulations must file templates of the reports produced by the tool and any related communications within 10 business days of first use. The proposed rule revisions will eliminate the requirement to file such reports or communications.

Filing Exclusion for Templates

Firms are not currently required to refile a communication based on a template previously filed with FINRA if the only changes to the communication were to update recent statistical or non-narrative information. The proposed rules will also allow firms to make changes to non-predictive narrative descriptions of market events and factual descriptions of portfolio changes without having to refile the template.

Bond Mutual Fund Volatility Ratings

Currently, firms may include a third party’s rating of the volatility of a fund’s bond portfolio in a retail communication if the communication contains certain disclosures and is accompanied or preceded by the fund’s prospectus. Additionally, such retail communications must be filed with FINRA at least 10 business days prior to first use and may not be used until any changes specified by FINRA have been made. Under the proposed rules, a firm will be allowed to include such bond volatility information without the communication being accompanied or preceded by a fund prospectus, and it may be filed within 10 business days of its first use.


For more information, please contact:

Andrew J. Davalla

Michael V. Wible

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