How Firms Can Avoid FINRA Advertising Review Fines

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Many in the financial industry stray towards the vaguer side of guidelines and regulations because they can sometimes be complex and often confusing. But paying attention to the granular details regarding wealth management industry advertising is important. Why? Because the Financial Industry Regulatory Authority (FINRA) has defined some unavoidable guidelines to comply with – which you can’t afford to ignore because these rules could lead to hefty fines. Here, we present how to avoid FINRA advertising review violations.

FINRA Rule 2210 defines the standards for FINRA member firms’ communications with the public, including specific rules for retail, institutional, and correspondence communications. To check whether your communication abides by these rules, you have to ensure three things:

  • All claims must be substantiated.
  • No misleading facts or assertions should be included.
  • The material presented should be fair and balanced.

“To be clear, these rules apply to advisor websites, blogs, newsletters, social media posts, etc. FINRA Rule 2210 pertains to any written, video, audio, or graphics content you share with clients and prospects. We’ve heard of wealth firms receiving fines because one of their advisors relied on their website vendor to submit to compliance on their behalf. Unfortunately, that didn’t happen, and the blog content had misleading facts, which upon FINRA review, resulted in a fine.

Our software can help decrease fines because of protocols in the software for marketing and compliance to review and approve content and then make it accessible to their advisors,” says Teresa Leno, CEO and Founder of Fresh Finance.

Leno says if these rules sound a bit confusing, they’re not once you understand these specifics:

Substantiated claims- Understanding the claims process is crucial to steering clear of violations. Remember that promotional statements should be clear, truthful, and not misleading. Any sweeping statements, such as “guaranteed returns,” “risk-free investment,” or “highest returns,” should be substantiated with data and explanations.

Misleading facts or assertions- Misleading or exaggerated statements are a strict “no-no.” FINRA can easily sniff these out, and your likelihood of spurring a violation is high. These may occur on an advisor’s website, client testimonials, or social media. It’s essential that the advisor takes precautions and doesn’t assume the website vendor understands misleading facts or assertions when setting up a website; always rely on compliance review.

Fair and balanced material- Keeping communications fair and balanced means that if you’re arguing for a specific financial strategy or investment, you should include both the advantages and disadvantages of your proposition. Also, any performance data presented should always be verified, have the source, and not exaggerate the potential outcome.

“Having a large database of approved content helps ensure advisors select only reviewed and approved articles for their website’s blog, social media, or newsletters. Everything is accessible in one place, and there’s a variety of content for everyone. Of course, some advisors will want to write their own, while others want to select from relevant topics and demonstrate their knowledge,” adds Leno.

The above essential points can help move your advertising communication smoothly through FINRA’s advertising review process. But pay attention to that you will need to produce advertising samples during the supervisory review of procedures and records. FINRA insists that you maintain records of all communications relating to the firm’s business. These include memos, reports, circulars, and any other written (or electronic) communication you share with clients, prospects, or employees must be stored. Advertising records also include website and social media content. It would be best to have a supervisor or team monitoring all advertising correspondence to help ensure FINRA rule 2210 is followed.

“There are slightly technical perspectives on FINRA rules surrounding social media and electronic communication. FINRA is fully aware of the impact of social media in today’s business world. They have guidelines for what you can and can’t do while using social media for public communication. Like other communication forms, the claims, assertions, links to third-party sites, and other details must be fair, balanced, and not misleading on all social media platforms,” says Leno.

Fresh Finance vets third-party publisher articles before compliance and marketing select social media-ready articles within the software. Many publications are automatically removed from Fresh Finance because they would violate FINRA rule 2210

Firms must remember about training and education so everyone knows advertising regulations and understands the consequences of not following them. Regular training sessions ensure everyone is on the same page and help avoid unforeseen violations and fines.

“FINRA rules aren’t there to make your life difficult – they ensure transparency and trust between firms and their clients and prospects. Remember to stick to the FINRA Rule 2210 guidelines to avoid hefty penalties and keep your firm and your advisors’ names out of the headlines,” adds Leno.

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