Ask people for a line from the Eagles song “Hotel California” and you can expect, “You can check out any time you like, but you can never leave.”  The famed verse comes 4:15 into a 6:30 song (an eternity by today’s standards), it is the last of the lyrics, and is followed by over 2 minutes of ponderous scales.  When asked about communications with regard to FINRA rules, I find a similar wave of sensations come over me: the relevant aspect is buried somewhere in the middle, tends to be the last place I look, and I sit wondering how to follow the letter of the rule while making salespeople happy only to realize I will never get those 6 and a half minutes back.

With regard to Institutional Communications, the rule is pretty straightforward.  The definition is spelled out in 2 sub sections that leave little room for interpretation (2210(a)3 & 4).  The next time Institutional Communications are singled out is in the section discussing Approval, Review, and Record Keeping (2210(b)3) where the rule essentially puts the onus on the member firm to police itself with no requirement to file the communications with FINRA.

What is revealing is the next section that applies to Institutional Communications is “Content Standards.”  I point this out because 2210(d)1 does not mention Institutional by name but applies to all communications by all firms.  FINRA had the opportunity when writing the rule and several times in the past few years to revise this area to allow carve outs or exemptions for Institutional Communications.  However, when it comes to General Content FINRA makes no exceptions for Institutional Customers.  The bar is set firmly and FINRA expects their standards to be met.

Given the subjective nature of the wording in 2210(d)1, there are several temptations to being too clever by half.  One should keep in mind that tastes, norms, and interpretations change; context is important; and that regulators take their duties very seriously.  FINRA has a dedicated staff that reviews submitted communications.  Their analysis and reasoning is clear and they are willing to discuss their opinions.

Compliance Officers are often maligned as the people that say, “No.”  Without getting into the validity of that stereo-type, “We are all just prisoners here of our own device.” In the case of communications, Compliance Officers can sometimes feel like a contortionist trying to get to “Yes” before realizing the best answer in this case is often to suggest meaningful edits.  So whether you dance to remember or dance to forget, skip to the middle of the rule, take FINRA’s intentions to heart, and spare yourself the 6 and a half minutes.


NCS Regulatory Compliance
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This article is not a solicitation of any investment product or service to any person or entity. The content contained in this article is for informational use only and is not intended to be and is not a substitute for professional financial, tax or legal advice

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