FINRA: Advertising Rules Guidance For DOL Disclosure For Participant-Directed Plans


FINRA has now provided regulatory guidance  to member firms about how its advertising rules  (NASD Rules 2210 and 2211) would apply to information they provide to participant-directed individual account plan participants under a U.S. Department of Labor rule.  The DOL rule, Rule 404a-5, was designed to ensure that plan participants are provided with sufficient information about the plan and designated investment options alternatives under ERISA.  The DOL rule requires the disclosure of certain plan and investment-related information, including performance information, to participants.

The FINRA guidance follows the SEC’s issuance, in October 2011, of a letter to the DOL in which the SEC’s staff agreed to treat information provided by a plan administrator to plan participants that complies with the DOL rule requirements as if it were a communication that complies with the requirements of Rule 482 under the Securities Act.  The SEC does not require that such information be filed under Rule 497 of the Securities Act and Section 24(b) of the Investment Company Act with the SEC or FINRA.  The SEC letter mentioned that FINRA staff intended to interpret applicable FINRA rules consistent with the SEC letter.

FINRA now says that if a firm provides information to plan participants that complies with the DOL rule requirements, it will treat the information as if it were a communication satisfying the content and filing requirements of NASD Rules 2210 and 2211.  Thus, firms would not be required to file the information with FINRA under NASD Rule 2210(c), nor would the information be subject to the content requirements of NASD Rule 2210.

However, FINRA warns, to the extent a firm includes in an advertisement or item of sales literature content promoting a product or service of the firm, in addition to what is required by the DOL rule, the non-required content will be subject to NASD Rules 2210 and 2211.





Author: Dexter Johnson

The author is a an attorney who for the past 14 years has concentrated his practice in representing, successfully, investment advisers, broker-dealers, corporations and individuals who are subject to SEC, FINRA, State or other regulations and who may be the subject of regulatory examination, review or investigation. He formerly worked at the SEC. His regulatory and litigation experience has encompassed virtually every type of securities issue in the industry. He has also negotiated favorable outcomes in many of these matters for his clients.