RCA - January 1996 - Ask The Analyst - General Issues

Q. When filing material for review, how can a member communicate to the NASD who the audience will be for a specific advertisement? Does the NASD treat advertisements differently depending on the audience? As an example, consider an advertisement in People magazine, compared to an ad in a publication for financial professionals.

A. When the advertisement is submitted for review, a member can use the cover letter to inform the NASD about the targeted audience, and the NASD will give this information full consideration. However, in the example above, the NASD would view both advertisements as communications with the general public, because there can be no assurance that everyone who reads a magazine designed for financial professionals will be a registered person. In contrast, when a member truly can target a more knowledgeable audience such as financial planners or experienced institutional investors through a mailer or other directed sales literature, the NASD review would consider this, and any comments would reflect the audience's sophistication level.

Q. Are article reprints considered sales literature? If so, how long can they be used?

A. Yes. Article reprints are considered sales literature when they are reproduced and used with the public to promote a member's securities business. There is no specific limitation on how long a member can use article reprints. However, the most important issue is whether the information in the reprint is accurate at the time of use. Members must remember that article reprints are not written as sales literature. They often contain information not permissible in communications with the public. Consequently, they require internal review by a registered principal, if necessary, and must be filed with the NASD. In addition, members always must receive permission from publishers of the original article to reprint or change it.

Q. Must all seminar invitations be filed with the NASD? Do seminar invitations require a prospectus offer?

A. NASD filing requirements depend on the invitation's contents and the intention of the seminar. If the invitation itself provides information about certain types of securities, then the member must file it. Specifically, members must file invitations that discuss mutual funds, variable annuities, variable life insurance, unit investment trusts, direct participation programs, collateralized mortgage obligations (CMOs), and government securities. Similarly, if these securities will be offered at the seminar, then the invitation must be filed with the NASD.

Q. What format is preferred by the NASD Advertising Regulation Department when I send a disk to review?

A. We prefer a Windows-type format on disk, along with a hard-copy print-out of the submission.