Free writing prospectuses are no longer excluded from the requirements of NASD Rules 2210 and 2211.  In other words, the requirements in NASD Rule 2210, Communications with the Public, and NASD Rule 2211 Institutional Sales Material and Correspondence - (i) content standards, (ii) principal review requirements, (iii) applicable filing requirements - shall apply to free writing prospectuses distributed by B/D's in a manner reasonably designed to lead to their broad unrestricted dissemination, as described in Securities Act Rule 433.

    Free Writing Prospectuses, Defined.  Securities Act Rule 405 defines it as a written communication, in print or electronic format, that constitutes an offer to sell or a solicitation to buy securities in a registered offering by means other than the statutory prospectus.  The free writing prospectus was introduced as part of the SEC’s Securities Offering Reform and was intended to provide issuers with greater flexibility in the use of communications during the registered offering process.  A free writing prospectus may include information that's not included in the registration statement, but it may not conflict with information in the filed registration statement, including any prospectus and any Securities Exchange Act reports incorporated by reference. 

A free writing prospectus must contain a legend advising investors that:

• the issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which the communication relates;
• before investing, the investor should read the prospectus and other documents filed by the issuer; and
• copies of these documents can be obtained for free through the SEC’s website or from the issuer or any underwriter or dealer participating in the offering.

    NASD Requirements.   Rule 2210(b)(1) requires a registered principal to review and approve each ad and item of sales literature before it's distributed.  This provision has helped ensure compliance with the content standards.  Rule 2210(c)(2) requires that firms file advertisements and sales literature regarding certain types of securities, such as registered investment companies and public direct participation programs, with FINRA within 10 business days of first use.  FINRA notes that B/D's are already required to file such free writing prospectuses with the SEC, and, therefore, filing them with FINRA will not cause delays in the offering process.

For additional information, click onto:   [ FINRA RegNote 10-52, October ]