RCA - March 1997 - Ask The Analyst - Electronic Communications And Filing Requirements

Q: If an Internet or commercial on-line site that has already been filed with and reviewed by the Advertising Regulation Department is updated or otherwise modified, where material information is not added, deleted, or otherwise affected but, the "look and feel" of the site is entirely different, does the site need to be reviewed by the NASD Regulation staff again?

A: An entirely new "look and feel" of a site may equal a material change and thus require a second filing with the Advertising Regulation Department. The NASD Regulation staff evaluates the entire presentation including text, graphics, audio (if applicable), and the location of text.

For example, assume you have already filed with and received clearance from NASD Regulation staff to use a web site which discusses specific mutual funds including their objectives, minimum investment amount, and how to obtain prospectuses. After receiving the staff s comment letter, you add graphics such as the pot of gold at the end of a rainbow or $1,000 bills falling from a money tree. These changes would modify the presentation materially-in this case by implying that the funds will be successful. Accordingly, you would be required to re-submit the modified Internet site for review and comment.

Similarly, changing the placement or relative prominence of disclosures or other material information in a previously reviewed site may also require resubmission. However, if the change in "look and feel" is non-material such as a modification of font style, color, or spacing of sections, you would not have to resubmit the site. (Please also refer to "Ask The Analyst About Electronic Communications" in the April 1996, Regulatory & Compliance Alert.)

Q: Do weekly "newsbriefs" that are continually added to an Internet home page need to be filed with the Advertising Regulation Department?

A: Content dictates whether a newsbrief must be filed. Newsbriefs providing information regarding, or commentary relating to the desirability of owning, registered investment companies, collateralized mortgage obligations, public direct participation programs, options, or government securities is subject to the filing requirements. In particular, please note that collateralized mortgage obligation and options material must be submitted 10 days prior to first use (see NASD Conduct Rules 2210(c) and 2220(c)).

You would not need to submit newsbriefs about other types of securities or those that merely provide updates on the stock and bond markets or economic conditions, unless your firm has never submitted advertising to NASD Regulation or is within its first year of submitting advertising. If your firm has never submitted material to NASD Regulation or is within its first year of submitting, you must file all advertising, including Internet material, 10 days prior to first use pursuant to NASD Conduct Rule 22I0(c)(3)(A).

Q: My firm has already submitted the script and storyboards for a television commercial to the Advertising Regulation Department and received a "no objection" comment letter. Do I need to file a final form of the commercial? And if so, what do I need to send?

A: Because of the material impact sound and graphics can have on the content of a commercial, the Advertising Regulation Department staff request that you send a video tape (VHS format) of the final commercial. The staff will review the final form of the commercial and contract you if it raises regulatory concerns. This final review is free of charge, assuming you already submitted the commercial in paper form.