FINRA Proposes Ending Mandatory Pre-Use Review of Retail Communications

The Financial Industry Regulatory Authority is seeking public comment on a proposal to overhaul Rule 2210, the rule governing broker-dealers’ communications with the public, that would eliminate the current requirement for a registered principal to approve most retail communications before they go out. Comments on the proposal are due Sept. 11.

Rule 2210 currently requires an appropriately qualified principal to approve retail communications – those reaching more than 25 retail customers within 30 days – before first use, with limited exceptions. FINRA said that requirement has become difficult to apply to social media and AI-generated content, given the speed and volume at which such communications can be produced and distributed.

Under the proposal, members would instead adopt written, risk-based procedures to determine which retail communications require pre-use principal approval, similar to the standard already used for institutional communications. FINRA outlined a non-exhaustive list of factors firms should weigh, including the complexity of the product or service, whether the communication makes a recommendation or promotes an affiliate’s product, whether it appears tailored to a specific individual, the inclusion of performance data or rankings, and the firm’s history of communication concerns with regulators.

FINRA said the change is intended to address specific interpretive challenges tied to newer technology. On social media, the regulator said the current distinction between “static” and “interactive” content – which determines whether pre-use approval applies – has become difficult to apply as social platforms have grown more interactive, and said risk from financial influencers, or “finfluencers,” exists regardless of that distinction. On AI, FINRA said members remain fully responsible for communications regardless of whether they are generated by a person or an AI tool, and that AI-based review tools may be used as part of a firm’s supervisory system if they are vetted, tested, and monitored.

The proposal would also change two filing-timeline requirements. New member firms currently must file retail communications for review from the effective date of their membership; the proposal would instead start that one-year filing-review period from the date of a new member’s first filing, since FINRA said most new members don’t file any communications for months after becoming members, effectively shortening the review period as currently structured. Separately, retail communications for registered investment companies that include self-published performance rankings or comparisons would move from a requirement to file prior to first use to a requirement to file within 10 business days after first use.

FINRA also proposed replacing detailed disclosure requirements for communications that reference past specific investment recommendations with a general requirement that such references be presented in a fair and balanced manner, a change intended to align broker-dealer standards more closely with the U.S. Securities and Exchange Commission’s investment adviser marketing rule.

In a preliminary economic impact assessment, FINRA said its advertising regulation department reviewed roughly 177,400 retail communications from 593 member firms between 2023 and 2025. Of those, 24% of communications filed prior to first use were found noncompliant, compared with 10% of communications filed after first use. Among first-year filings from new members, FINRA said 69% were noncompliant, and new members’ initial filings came an average of 111 business days after their membership became effective. For investment company performance-ranking communications, 13% of the 1,315 filings reviewed over the period were noncompliant.

The changes would apply broadly across broker-dealer retail marketing, including material used by wholesalers and sponsors to market nontraded real estate investment trusts, Delaware statutory trusts, interval funds, and other alternative investment products to retail investors.

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