NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
An agent of a broker-dealer is preparing to send a mass email to 500 prospective clients, promoting a new mutual fund. The email includes performance charts, disclaimers, and a link to the fund's prospectus. What is the agent's primary obligation under the Uniform Securities Act regarding this communication?
- AInclude a prominent disclosure that the mutual fund is not FDIC insured.
- BObtain pre-approval from a supervisory principal at the broker-dealer before sending.
- CEnsure the email is filed with the state Administrator prior to its first use.
- DVerify that all 500 recipients are accredited investors.
Show answer & explanationAnswer & explanation
Correct answer: B. Obtain pre-approval from a supervisory principal at the broker-dealer before sending.
All communications with the public, especially those promoting securities, must be reviewed and approved by a qualified supervisory principal of the broker-dealer before dissemination to ensure accuracy, completeness, and compliance with all regulations.
Why the other options are wrong
- A. While important for mutual funds, this is a specific disclosure requirement, not the primary overarching obligation regarding the communication itself.
- C. While some advertisements may require filing, pre-filing with the Administrator for every mass email is not a universal primary obligation for agents; internal firm approval is more immediate.
- D. Mutual funds are generally offered to the public, not exclusively to accredited investors, so verifying all 500 recipients are accredited is not a typical requirement for this type of communication.
Agent Communication Supervision
Agents of broker-dealers must have all communications with the public reviewed and approved by a supervisory principal of their firm before use.
- Applies to all written and electronic communications.
- Ensures compliance with advertising rules and anti-fraud provisions.
- Internal firm supervision is paramount.
Memory trick: Agents' messages need a principal's nod before they hit the send button.