Is Your Marketing Agency Subject to the Conduct Rules?

            If you are a marketing agency and your client’s salespeople are making calls to potential clients on behalf of your client, your agency may be subject to the FTC’s conduct rules. Whether or not this is the case will depend on whether the salespeople are considered employees or independent contractors of your client, as well as other factors. But one thing you can be sure of? The FTC can take action against agencies that violate the rules. In fact, they have done so in the past, including in cases involving telemarketing and internet marketing agencies.

Are Marketing Agencies Covered Under FINRA Rule 2111

            The FINRA rules don’t apply only to firms. They also apply to individuals and other organizations. The conduct rules cover some of these organizations, such as market makers and government securities brokers and dealers. The list of covered entities also includes members of FINRA that aren’t FINRA firms, such as registered broker-dealers with principal operations outside of FINRA’s jurisdiction.

Are Advertising Agencies Covered Under FINRA Rule 2111

            Advertising and Business Communications with the Public? The regulatory landscape of advertising has changed dramatically since 1999 when FINRA promulgated its first rules addressing advertising. Some of these changes have been discussed here at [fictitious law firm name] on our website and in a recent law review article. An interesting question for today’s discussion is whether today’s evolving agency structure may affect who is covered by these conduct rules. As we will see, for now it does not.

When Can a Broker Call an Ad Agency Directly About An Account?

            As a trade association, ASAE is not a government agency. The Federal Trade Commission’s (FTC) rules and guidelines do not apply to us directly. We have also been exempt from reporting requirements such as filing an Annual Report on Form 10-K with the Securities and Exchange Commission (SEC). But what about when we serve as broker of record for our member agencies, working as an intermediary between them and clients or prospects? What are we then, and how should that impact how an agency or firm interacts with us in terms of trade show attendance and sponsorship? In order to help marketers understand these relationships, here are some explanations related to similar discussions we’ve had internally at ASAE

Do Communications Between Clients and Advertisers Provide a Platform for Commissionable Activity

            It’s no secret that advertisers covet some communications with clients – such as post-click blogs or email newsletters – because they’re seen as perfect opportunities for driving commissionable activity. But, under FINRA rules, must they be treated like any other form of client communication and disclosed to your agency? No. As a result, you may miss out on being able to earn a fee for your work.

What Does It Mean For My Marketing Agency if We’re Not Covered Under FINRA Rule 2111?

            When it comes to advertising and selling investments, SEC rule 165 and FINRA rule 2111 cover marketing agencies. Rule 165 states that: Unless a dealer is a member of a self-regulatory organization (SRO), it shall not, by means of any communication or advertisement, directly or indirectly refer to any testimonial concerning a securities transaction or make any comparison with another security. Likewise, FINRA rule 2111 prohibits firms from referencing performance data unless they are regulated by FINRA. If your agency falls into one of these categories, you do not need to worry about complying with those rules. However, if your firm falls under neither category than there is no formal requirement that requires you act ethically in your marketing efforts—just be honest!

How Do I Know If We’re Covered By The Conduct Rules Or Not?

            First, look at your contract. If you’re a small business selling consumer products or services, then chances are you aren’t regulated by these rules. For example, a photographer who creates portraits for local events isn’t covered by these rules. On your website and marketing materials (like brochures and social media posts), make sure you include a clear statement that you’re not subject to these conduct rules—and that if people have complaints they should contact you directly.

How Will These New Requirements Affect Me As A Marketer/Advertising Professional?

            In short, these new rules are designed to protect consumers and offer an additional level of transparency into how advertising professionals do business. Ultimately, they should help mitigate fraudulent or misleading marketing practices that can arise when you’re working with a smaller marketing firm. And while you may think that these changes don’t directly affect you, your company is sure to be affected in some way down the line (i.e., clients/customers/audiences will become more aware of regulations and create a certain level of expectations). So let’s take a look at what marketers need to know about these new rules...