Seeks Business for the Broker-dealer from Customers and Potential Customers
Finding clients without breaking the rules
Every contact with a prospect is a communication with the public, governed by FINRA Rule 2210. Know the three categories: correspondence (written, sent to 25 or fewer retail investors in any 30-day period), retail communication (written, more than 25 retail investors in 30 days), and institutional communication (to institutions only, no principal pre-approval required). Retail communications require a registered principal's approval before first use, and retail communications about investment companies and variable contracts must be filed with FINRA's Advertising Regulation Department within 10 business days of first use - filing follows use, it is not pre-approval.
Prohibited or restricted content: projections or forecasts of investment results; misleading performance or rankings (show source and date, and state that past performance does not guarantee future results); testimonials without disclosing whether the speaker was paid; any implication of a guarantee or of FINRA/SEC endorsement. Gifts to employees of other firms are capped at $100 per person per year, and entertainment cannot be conditioned on receiving business.
Cold calling
Under the TCPA/Telemarketing Sales Rule and FINRA rules: no calls before 8 a.m. or after 9 p.m. local time at the called party; scrub against the national and the firm's do-not-call lists; honor an internal do-not-call request immediately and keep the record; disclose your name, your firm, and the purpose of the call; maintain written DNC procedures. Paying unregistered persons transaction-based referral compensation is prohibited.
Rule of thumb: if a piece names a specific fund, shows a performance number, or uses the word "guarantee," assume principal approval plus a FINRA filing.
Worked example: A rep wants to email a flyer showing a fund's 5-year return to 300 prospects. That is a retail communication: principal approval first, then file with FINRA within 10 business days of first use.