NASAA Series 63Communication with Customers and ProspectsEasy
An investment adviser representative (IAR) sends a quarterly newsletter to all clients. The newsletter discusses general market trends, economic forecasts, and provides educational content about different investment strategies. It does not recommend specific securities or include any personalized advice. Under the Uniform Securities Act, how is this newsletter generally classified?
- AAs correspondence, requiring internal review but not public filing.
- BAs educational material, which is exempt from most communication regulations.
- CAs an offer to sell, which triggers prospectus delivery requirements.
- DAs an advertisement, subject to specific filing and review requirements.
Show answer & explanationAnswer & explanation
Correct answer: D. As an advertisement, subject to specific filing and review requirements.
Communications distributed to more than a limited number of clients or prospects that promote the services of the firm or discuss investments are generally considered advertisements under the Uniform Securities Act and related rules, even if they don't recommend specific securities.
Why the other options are wrong
- A. Correspondence is usually defined as communication to a single client or a very small group.
- B. While educational, its broad distribution makes it an advertisement under securities law.
- C. It's not an offer to sell specific securities, but rather a promotional communication for the firm's services.
Advertisement (USA)
Any written communication distributed to more than a limited number of persons that offers or promotes investment advisory services or securities.
- Broader definition than 'correspondence'.
- Subject to specific content and filing rules.
- Includes newsletters, circulars, publicly available websites.
Memory trick: Correspond with one, Advertise to many, Educate all, but never misrepresent.