TESTIMONIALS

From time to time, broker dealers will use testimonials made by people of national or local recognition in an effort to generate new business for the firm. If the individual giving the testimonial is quoting past performance, relating to the firm's recommendations, it must be accompanied by a disclaimer that past performance is not indicative of future performance. It must be disclosed if the individual giving the testimony was compensated in any way. Should the individual's testimony imply that the person making the testimony is an expert, a statement regarding the person's qualifications as an expert must also be contained in the ad or sales literature. Research prepared by outside parties must disclose the name of the preparer.

TAKENOTE!

Investment advisers are prohibited from using testimonials or statements regarding a client's experience with the adviser as part of any advertisement or sales literature.

FREE SERVICES

If a member firm advertises free services to customers or to people who respond to an ad, the services must actually be free to everyone and with no strings attached.

MISLEADING COMMUNICATIONS

The following are some examples of misleading statements, which are not allowed to appear in communications with the public:

• Excessive hedge clauses.

• Implying an endorsement by FINRA, the NYSE, or the SEC.

• Printing the FINRA logo in type that is larger than the type of the member's name.

• Implying that the member has larger research facilities than it actually has.

• Implying that an individual has higher qualifications than he or she actually has.

SECURITIES INVESTOR PROTECTION CORPORATION ACT OF 1970 (SIPC)

The Securities Investor Protection Corporation (SIPC) is a government-sponsored corporation that provides protection to customers in the event of a broker dealer's failure. All broker dealers that are registered with the SEC are required to be SIPC members. All broker dealers are required to pay annual dues to SIPC's insurance fund to cover losses due to broker dealer failure. If a broker dealer fails to pay its SIPC assessment, it may not transact business until it is paid.

 
< Prev   CONTENTS   Next >