Finra Notice to Members 12-29, announced the SEC approval of far reaching updates to previous NASD and NYSE communications rules. (NTM 12-29) The new rules will be numbered 2210 and 2212-16 and will be collectively referred to as the “Communication Rules”. These new rules will incorporate and replace the following rules:
- Finra rules: 2210, 2211, and Interpretive Memos 2210-1, 2210-3 through 2210-8
- NYSE Rule 472
The new rules go into effect February 4, 2013.
Of interest are the following:
- A reduction in the number of defined types of communication from six to three;
- The formal incorporation of social media as a type of retail communication under 2210(c)(7)(m). (The previous guidance was under NTM 10-06, Social Media Web Sites.)
Here’s an extract on the three categories:
The rule change reduces the number of current communication categories from six to three, as follows:
- Institutional communication includes written (including electronic) communications that are distributed or made available only to institutional investors, but does not include a firm’s internal communications. “Institutional investor” generally has the same definition as under NASD Rule 2211(a)(3).4
- Retail communication includes any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. “Retail investor” includes any person other than an institutional investor, regardless of whether the person has an account with the firm.
- Correspondence includes any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30 calendar-day period.
Communications that currently qualify as advertisements and sales literature generally fall under the definition of “retail communication.” In addition, to the extent that a
firm distributes or makes available a communication that currently qualifies as an independently prepared reprint to more than 25 retail investors within a 30 calendar-day period, the communication also falls under the definition of “retail communication.”
Compliance officers and supervisors will (at a minimum) need to do the following:
- Update their policies and procedures for review of social media communications;
- Integrate social media review into their supervisory systems;
- Create ESI search and retrieval capabilities for social media discovery purposes.