Fair Housing Specialist (FHS)

Correct: FINRA Rule 2210 requires that all retail communications be fair, balanced, and provide a sound basis for evaluating the facts. When a firm advertises a service to dispose of or liquidate securities and intends to act as a principal in those trades, this constitutes a material conflict of interest. The General Securities Principal is responsible for ensuring that such communications include clear, prominent disclosures regarding the firm’s role to prevent the advertisement from being misleading.

Incorrect: Retroactively filing an advertisement with FINRA does not cure a violation of content standards or the failure to provide required disclosures at the time of use. While institutional communications have different filing requirements, they are never exempt from the fundamental requirement to be fair, balanced, and not misleading. Relying on a general website disclosure is insufficient because specific promotional materials must contain the necessary context and disclosures to be considered balanced on their own merit.

Takeaway: Retail communications promoting liquidation or disposal services must explicitly disclose material conflicts of interest, such as the firm’s capacity as a principal, to comply with FINRA’s fair and balanced standards.

Correct: Under FINRA Rule 2210, all retail communications must be fair, balanced, and provide a sound basis for evaluating the facts. Since Rule 144 involves complex legal requirements such as volume limits and holding periods, any advertisement of disposal services for these securities must include these details to avoid being misleading. The principal is responsible for ensuring that the communication does not omit material facts that would cause the material to be misleading.

Correct: Under FINRA Rule 2210, all retail communications must be approved by a registered principal before the earlier of first use or filing with FINRA. The principal is responsible for ensuring that the communication is fair, balanced, and not misleading. Claims that ‘ensure’ a specific outcome or speed in the disposal of restricted securities under Rule 144 are generally considered exaggerated or unwarranted, as market conditions and regulatory volume limitations are outside the firm’s absolute control. Therefore, the principal must ensure such claims are qualified and balanced with appropriate risk disclosures.

Incorrect: Option B is incorrect because the SEC does not typically pre-approve or review broker-dealer advertisements; this is the responsibility of the firm’s principal and FINRA’s Advertising Regulation Department. Option C is incorrect because advertising a service to assist in the legal disposal of securities (such as Rule 144 sales) is permitted for retail audiences; the prohibition on general solicitation applies to the offering of unregistered securities, not the service of assisting in a compliant resale. Option D is incorrect because FINRA Rule 2210 applies to any written or electronic communication distributed to more than 25 retail investors within a 30-day period, including those that promote the firm’s general securities-related services.

Takeaway: All retail communications regarding securities disposal services must be approved by a principal and must provide a fair and balanced representation of the regulatory constraints and market risks involved.

Correct: Under FINRA Rule 2210 (Communications with the Public), all retail communications must be fair, balanced, and not misleading. Since the firm’s advertising claims a specific, high-level destruction protocol that is not actually being performed by the outsourced vendor, the materials are considered misleading. The General Securities Principal is responsible for ensuring that all communications are accurate. The immediate priority is to stop the distribution of the false information and ensure compliance with filing and recordkeeping requirements.

Incorrect: Allowing the distribution of misleading inventory is a violation of FINRA’s standards for communications with the public, regardless of cost-saving intentions. Verbal disclaimers are insufficient to cure a material misstatement in written retail communications. Seeking a retroactive waiver from the SEC is not a valid regulatory procedure for addressing misleading advertising and does not address the underlying compliance failure regarding Rule 2210.

Takeaway: A General Securities Principal must ensure that all claims in retail communications regarding outsourced operational safeguards are accurate and substantiated to prevent violations of FINRA Rule 2210.

Correct: Under FINRA Rule 2210, any written or electronic communication distributed or made available to more than 25 retail investors within any 30-calendar-day period is defined as a retail communication. Retail communications generally require approval by a registered principal before the earlier of first use or filing with FINRA’s Advertising Regulation Department. Because the brochure was sent to 40 prospective retail investors, it exceeds the 25-person threshold for correspondence and must be treated as a retail communication, necessitating pre-approval by a Series 24 principal.

Incorrect: Correspondence is defined as any written or electronic communication distributed to 25 or fewer retail investors within any 30-calendar-day period; since 40 investors were reached, this classification is incorrect. Institutional communications are those distributed solely to institutional investors; prospective retail investors do not meet this definition regardless of the subject matter. There is no broad exemption from principal approval for ‘administrative’ or ‘operational’ marketing materials if they are distributed to a retail audience in a manner that meets the definition of a retail communication.

Takeaway: Communications sent to more than 25 retail investors within a 30-day period are retail communications and require prior principal approval, regardless of whether they promote specific securities or general firm services.

Correct: Under FINRA rules and the Securities Exchange Act of 1934, a person is subject to statutory disqualification if they have been convicted within the past ten years of any felony or certain misdemeanors, specifically those involving theft, robbery, burglary, perjury, or fraud. When a firm discovers a reportable event that was omitted from a Form U4, it must file an amendment promptly, which is defined as within 30 days. Because the misdemeanor involved theft, the Principal must also evaluate the representative’s eligibility to remain associated with the firm due to the statutory disqualification criteria.

Incorrect: Placing a representative on heightened supervision or notifying FINRA within 10 days does not satisfy the specific requirement to amend the Form U4 within the 30-day window for disclosure updates. Reporting via Rule 4530 is a separate requirement for certain disciplinary events and does not replace the obligation to maintain an accurate Form U4 in the CRD system. Waiting for a state regulator’s determination before updating the CRD is incorrect, as the firm has an independent and immediate obligation to ensure the representative’s registration information is current and accurate.

Takeaway: Firms must amend Form U4 within 30 days of discovering a previously undisclosed misdemeanor involving theft, as such convictions trigger statutory disqualification if they occurred within the last ten years.

Correct: Under FINRA Rule 2210, any written or electronic communication distributed to more than 25 retail investors within a 30-day period is considered a retail communication. This requires a registered principal’s approval before the earlier of its first use or filing with FINRA. The principal is responsible for ensuring the content is fair and balanced, and that it does not make exaggerated or misleading claims about the security provided by the destruction services, as this would violate the general standards of commercial honor and just and equitable principles of trade.

Incorrect: Filing with FINRA is not required for general retail communications that do not involve specific products like options, investment companies, or variable products, unless the firm is in its first year of operation. Including a vendor’s internal audit reports (SOC 2) is not a regulatory requirement for retail communications. While correspondence (sent to 25 or fewer retail investors) allows for post-use review, a marketing campaign intended for a broader audience or prospective clients would be classified as a retail communication, necessitating prior approval.

Takeaway: Retail communications regarding a firm’s operational security and record destruction protocols must be approved by a principal prior to use and must adhere to the fair and balanced standards of FINRA Rule 2210.

Correct: Under the SEC Marketing Rule (Rule 206(4)-1) of the Investment Advisers Act of 1940, investment advisers are permitted to use testimonials in advertisements provided they meet specific disclosure requirements. These include clear and prominent disclosure of whether the person giving the testimonial is a current client, whether they were compensated (directly or indirectly), and any material conflicts of interest resulting from the relationship with the adviser.

Incorrect: Filing with FINRA is a requirement for certain broker-dealer communications under FINRA Rule 2210, but investment adviser advertisements are governed by the SEC and do not require pre-filing with FINRA. The absolute prohibition on testimonials for retail investors was removed with the 2020 amendments to the Marketing Rule, allowing them if disclosures are met. While Rule 144 compliance is a regulatory necessity for the underlying transaction, the advertising rule focuses on the integrity and disclosure of the marketing communication itself, not the legal verification of the client’s past trades by counsel.

Takeaway: The SEC Marketing Rule allows investment advisers to use testimonials if they provide clear and prominent disclosures regarding compensation and conflicts of interest.

Correct: Under FINRA Rule 2210, all retail communications must be fair and balanced. When advertising a service that involves the permanent disposal of physical evidence of ownership, the principal must ensure the communication clearly explains the nature of the service and the necessity of client consent, ensuring no material facts are omitted.