Series 7 Prospecting and Communications Practice Questions

Correct answer: C. 25 retail investors

FINRA Rule 2210(a) defines 'correspondence' as any written or electronic communication distributed or made available to 25 or fewer retail investors within any 30-calendar-day period. Once a communication reaches more than 25 retail investors in that window, it is reclassified as a 'retail communication,' triggering stricter content standards and, for many types, prior principal approval. The other figures are not thresholds found anywhere in the rule.

• A. 10 is below the actual threshold FINRA uses to distinguish correspondence from retail communication.
• B. 15 is not the correct number; the rule sets the correspondence threshold higher.
• C. Correspondence under Rule 2210 is limited to distribution to 25 or fewer retail investors within any 30-calendar-day period; exceeding that reclassifies the piece as retail communication.
• D. 35 exceeds the actual threshold set in the rule; correspondence is capped at 25 retail investors within 30 days.

• Source: FINRA Rule 2210 (Communications with the Public)

Correct answer: A. Yes, an inquiry creates an established business relationship allowing calls for up to 3 months from the date of the inquiry

The established business relationship (EBR) exception permits calls to a Do-Not-Call registrant for 3 months following the consumer's inquiry or application, and for 18 months following the consumer's last purchase, transaction, or payment. Since this prospect merely inquired (no transaction) six weeks ago, the firm remains within the 3-month inquiry-based window and may call. An inquiry does not get the longer 18-month period — that is reserved for completed transactions.

• A. A mere inquiry (without a completed transaction) creates an established business relationship that permits telemarketing calls for up to 3 months from the date of the inquiry, so a call six weeks later is still permitted.
• B. 18 months is the duration tied to an established business relationship formed by a completed transaction, not by a mere inquiry, which carries the shorter 3-month window.
• C. An inquiry alone, not just a completed transaction, can create a (shorter) established business relationship exception under the Do-Not-Call rules.
• D. The Do-Not-Call rules do carry recognized exceptions, including the inquiry-based established business relationship, so this overstates the registry's reach.

Correct answer: D. 3 years total, with the first 2 years easily accessible

Under SEC and FINRA recordkeeping requirements, communications with the public generally must be preserved for three years, with the records from the most recent two years kept in an easily accessible place for prompt retrieval, consistent with the firm's broader books-and-records obligations.

• A. This understates the required retention period; the standard is 3 years total, not 2.
• B. This significantly overstates the requirement; there is no standard 7-year, permanently-accessible rule for general communications with the public.
• C. This overstates the retention period and accessible window; the standard rule is 3 years total with 2 years easily accessible, not 5 years with 3 accessible.
• D. Books-and-records rules for communications with the public generally require retention for 3 years, with the most recent 2 years kept in an easily accessible location.

Correct answer: C. Retail communication

FINRA Rule 2210 defines a retail communication as any written communication distributed or made available to more than 25 retail investors within a 30 calendar-day period. Correspondence, by contrast, is directed to 25 or fewer retail investors within that period.

• A. Incorrect — correspondence applies to 25 or fewer retail investors within 30 days.
• B. Incorrect — institutional communication is directed only to institutional investors.
• C. Correct.
• D. Incorrect — public appearance covers live/interactive forums, a separate category.

• Source: FINRA Rule 2210 (Communications with the Public)