FINRA Cracking Down on Use of Ghostwritten Material

Are you providing clients with published information about investing that you didn’t actually write? Then watch out. FINRA has just released a regulatory notice warning member firms of their obligation to supervise representative use of ghostwritten material.

According to FINRA, this use must comply with Rule 2210, which prohibits false, misleading, or exaggerated public communications. Materials must also comply with the principles of fair dealing and good faith. FINRA is concerned that using ghostwritten content violates basic standards of public communications.

Four types of materials are setting off FINRA alarms:

1. Hardcover books or pamphlets on investment topics that representatives purchase with their name on the cover.
2. Articles that appear to be written by the representative, which, in fact, were written by someone else.
3. Interview-style broadcasts, webcasts, or other public appearances in which the representative appears to be interviewed by an independent third party, but in which the questions and answers were pre-scripted.
4. Magazines that appear to contain articles written by a representative, but that were actually produced by a vendor. Publishing a representative’s photo in such magazines next to well known financial or public figures is also a FINRA concern.

To stay out of hot water, make sure your third-party content clearly states that it was either prepared by the third party or prepared for your use. Also, make sure that magazine-style interviews are clearly labeled as advertisements.

What “Red Flags” are affecting your business? The National Ethics Bureau welcomes your input. Send your comments to: hlew@ethicscheck.com