BROKER-DEALER COMMUNICATIONS WITH THE PUBLIC

If a written communication is distributed to persons that are not RMS agents, then such communication is a broker-dealer communication to the public.

All broker-dealer communications to the public must prominently disclose the name of the broker-dealer, Rainmaker Securities, LLC. It must also disclose that the distributing individual is an agent of the broker-dealer.

MEDIUM OF COMMUNICATION

RMS agents should conduct written communications related to brokerage activities via their RMS monitored email.

If an RMS agent needs to distribute a written communication related to brokerage activities outside of RMS monitored email, then such written communication should be submitted for principal approval via the RMS web portal prior to first use. Examples of non-email written communications include, websites, social media, business cards, etc. All of the foregoing must be approved prior to distribution.

EMAIL TO 25+ PERSONS - PRINCIPAL APPROVAL REQUIRED

Emails (including attachments) with content sent to less than 25 external recipients in any 30 day period do not require principal approval prior to first use. However, if an RMS agent wants to distribute an email with the same or substantially similar content (including attachments) to 25 or more external recipients within any 30 day period, then such email content must be submitted for principal approval via the RMS web portal prior to first use.

SALES COMMUNICATIONS - PRINCIPAL APPROVAL ALWAYS REQUIRED

The following types of documents must always be submitted for approval prior to external distribution to the public, regardless of the number of recipients:

  • Investor presentations

  • Research reports

  • Executive summaries

  • Investment Fund profile sheets

Note that approval of a securities offering via the due diligence process is a separate and distinct process from approval for communications with the public. Not all documents used to ascertain whether a securities offering meets the due diligence requirements are appropriate to use in marketing efforts. Therefore, if time is of the essence, an agent may wish to simultaneously request due diligence approval and advertising approval.

COMMUNICATIONS CONTENT STANDARDS

The following content standards apply to all broker-dealer communications with the public, regardless of the number of recipients:

  • Must be based upon principles of fair dealing and good faith

  • Must be fair and balanced

  • Must provide a sound basis for evaluating the facts

  • Must not make false, unwarranted, exaggerated or misleading statements of material fact

  • Must not omit information that, in context, would cause a statement to be misleading

  • Must not make promises of future performance

  • Must not predict or project performance of an investment

  • Must not imply that past performance of an investment will recur

  • Must not make use of back-tested data

  • Must not characterize any investment as tax-free

  • Must not include investor testimonials for the securities

FINRA content standards do not apply to issuer-prepared offering documents such as: prospectuses, fund profiles, offering circulars, or other similar documents concerning securities offerings that are exempt from SEC registration, even if distributed by a broker-dealer.

FINRA content standards only apply to broker-dealers, thus they do not apply to any communications directly between the seller and the buyer. However, it is impermissible for an RMS agent to instruct an issuer or seller (or any third party) to send a potential investor any communication that would otherwise be prohibited if distributed by the broker-dealer.

COMPANY FINANCIAL STATEMENT PROJECTIONS

Under FINRA rules, a broker-dealer communication may not predict or project performance of an investment. Intelligent, reasonable people have reached conflicting conclusions regarding whether or not financial projections for an issuer's business fall within FINRA's general prohibition on performance projections.

Until FINRA provides further clarification, RMS is forced to take the conservative approach and prohibit projected financial statements in broker-dealer communications unless they are a part of the offering documents prepared by the issuer, such as a PPM or CIM.  Also, it is worth noting that the FINRA prohibition on communications projecting performance does not apply to any communications from the issuer. However, it is impermissible for an RMS agent to instruct an issuer (or any third party) to send a potential investor any communication that would otherwise be prohibited if distributed by the broker-dealer.

SEC PRIVATE PLACEMENTS

RMS only deals in private placements of securities. Most private placements may not be offered, advertised, or solicited to the general public. This means that, in order to offer the securities to a potential investor, you must have a substantive, pre-existing relationship with that potential investor.

In short, you have a pre-existing relationship with an investor if you knew that person prior to the offering of the securities. That relationship is substantive if you have sufficient information about the investor to evaluate their financial circumstances, level of sophistication, and status as an accredited investor. This can easily be accomplished by having the investor complete the RMS customer account form.

In general, there are two exceptions to this requirement, one for primaries and one for secondaries.

  1. General solicitation is only allowed for a primary private placement if the issuer of the securities in the offering has filed a Form D with the SEC and has elected to conduct a 506(c) Regulation D offering.

  2. General solicitation is only allowed for a secondary trade if the trade utilizes the 144A exemption from registration. To utilize the 144A exemption, you must hold the reasonable belief that the purchaser of the securities is a Qualified Institutional Buyer. A Qualified Institutional Buyer is an entity (never an individual) that owns or invests $100+ million in assets.

SEC ANTI-FRAUD REGULATIONS

The SEC has established severe penalties for violating anti-fraud regulations. Section 10(b) is the primary statutory weapon against fraud. Section 10(b) is the anti-fraud provision of the Exchange Act, while Rule 10b-5 is the rule the SEC promulgated under that section. Rule 10b-5 prohibits the use of any "device, scheme, or artifice to defraud." Rule 10b-5 also imposes liability for any misstatement or omission of a material fact, or one that investors would think was important to their decision to buy or sell a stock. The scope of the anti-fraud provision is extremely broad. Issuers, broker-dealers, and the broker-dealer agents may all be subject to both monetary and criminal sanctions in the event of certain violations.

PUBLIC APPEARANCES

Public speaking appearances that are unscripted do not require principal approval. However, the agent should note that the FINRA communications content standards still apply to unscripted speaking events. Even more importantly, the registered agent should be extremely careful to refrain from saying anything that could be construed as a recommendation to buy, sell, or hold any securities during an unscripted speaking event.

Written communications used in public appearances, such as scripts or presentations, are governed by the same rules as other written communications, which may require principal approval prior to use.

RESEARCH REPORTS

RMS proprietary research reports, executive summaries, and quarterly news updates are pre-approved marketing materials. Use of these materials does not requires submission via the web portal.