Sales Practices and Customer Communications
Fair and balanced, every time
NFA Compliance Rule 2-29 governs all promotional material - letters, emails, websites, social posts, radio scripts, seminar slides - whether it reaches one prospect or a thousand. Material must be fair and balanced, must not be misleading or high-pressure, may not state or imply a guarantee against loss, and may not minimize risk. Hypothetical results must be labeled hypothetical and accompanied by the required caveat that they rest on assumptions, do not reflect actual trading, and are not indicative of future results. Actual past performance must carry a disclaimer that past results do not predict future results, with the time period and the treatment of fees disclosed. Testimonials must disclose that the results are not typical. A supervisor must approve material before use, and copies must be retained. Certain categories - for instance material containing performance figures or forecasts - must be submitted to NFA, which may object; NFA's silence is not an endorsement.
Also know Compliance Rule 2-30 on knowing your customer and obtaining written discretionary authorization, and the CFTC cold-calling rules at 17 CFR 155.2 and 155.3: identify yourself and the firm, state that you are soliciting, and maintain do-not-call procedures and training.
Traps: believing NFA review makes a piece compliant; presenting hypothetical returns as actual; omitting risk disclosure from a website performance page; and letting an unapproved flyer leave the branch.
Worked example: a branch wants a flyer touting "40% annual returns." If hypothetical, label it and add the caveat; if actual, add the past-performance disclaimer and disclose the period and fee treatment. Either way, obtain written supervisory approval and retain a copy.
Rule of thumb: if a reasonable customer could read it as assuring profits, rewrite it.