What is true about communications promoting a security sent to more than 25 retail investors?

When communications promoting a security are sent to more than 25 retail investors, they are classified as retail communication. This categorization is important because it establishes the standards and regulations that govern how firms can communicate with retail investors. Retail communications are subject to specific rules to ensure that they are fair and balanced, providing necessary disclosures.

The classification highlights the significance of the target audience; once the communication reaches a broader scope beyond 25 retail investors, it shifts from being considered personal correspondence to a formal retail communication, which is further regulated. Although it is true that certain types of retail communications might need to be submitted to FINRA for approval, this requirement specifically applies to certain types of communications and is not universally true for all retail communications. Additionally, while recommendations regarding securities may be present in some forms of communication, retail communications can indeed include such recommendations as long as they adhere to regulatory standards.

Understanding this classification helps ensure compliance with regulatory requirements and assists firms in maintaining transparency with investors.