FINRA Allows Market Letters Without Principal Approval
FINRA has excepted “market letters” from its definition of “sales literature,” thereby allowing firms to forego principal review before distribution. FINRA defines “market letter” as correspondence that includes (i) broad-based indices, (ii) comments on market conditions, (iii) sector-based technical analysis, (iv) statistical analyses of multiple companies, (v) recommendations regarding increasing/decreasing holdings in a particular industries or sectors, and/or (vi) notices of ratings or price target changes. Market letters need not be approved by a principal if sent only to existing retail customers and fewer than 25 prospective retail customers. However, principal review would be required if the letter is sent to more than 25 existing customers and makes a financial or investment recommendation or otherwise promotes a product or service.
OUR TAKE: FINRA changed the rule to expedite the flow of information to the market. However, FINRA reminds firms that they still must have 3010 procedures that ensure appropriate review of outgoing correspondence.