Communication Standards and Escalation

The central principle: Say what is supported, explain what remains unresolved, and involve the person authorized to resolve it.

Understand Which Standards Apply

An SDR may work for a technology provider, an issuer, a broker-dealer, or another service organization. The requirements governing the SDR’s activities depend on that role and the substance of the communication.

Compliance means following applicable laws, regulations, contractual requirements, and organizational policies. Supervision means the oversight used to ensure that people and processes operate within those requirements.

FINRA’s communications rules apply to member firms and relevant associated activities. They should not be described as automatically governing every independent technology company. Where applicable, FINRA standards require fair, balanced communications and prohibit false, misleading, exaggerated, or promissory claims. Approval, supervision, and recordkeeping requirements depend on the communication category and circumstances. [R47] For this manual, accurate, clear, supported communication is the operating standard across the team. The designated legal and compliance personnel determine the specific requirements for each activity.

Identify the Audience and Purpose

Before sending a message, determine whom it addresses and what it is intended to accomplish.

Communication Purpose Appropriate handling

Issuer business development Explore a company’s financing needs and possible services Use approved service descriptions and discovery materials General education Explain concepts such as tokenization or preferred shares Present balanced explanations without implying transaction approval Offering-related investor communication Generate interest in or explain a specific investment Use the authorized offering process and materials Provider coordination Resolve operational or contractual questions Share information with authorized participants

Communication Purpose Appropriate handling

Internal handoff Transfer facts and unresolved issues to specialists Label evidence, assumptions, and confidentiality clearly Calling a document “educational” does not determine its legal treatment. Its content, context, audience, and purpose matter.

Example: A general explanation of secured notes differs from a message encouraging recipients to purchase a particular issuer’s notes at a stated yield.

Label Statements by Their Evidence

A useful communication distinguishes what is known from what is being considered.

assumptions “The preliminary budget assumes two provider integrations.” Hypothesis A possibility requiring investigation “Existing lender rights may affect collateral availability.” Do not convert one category into another during a handoff.

Weak note:

“Company qualifies for a $12 million secured offering.”

Better note: “Management is considering a $12 million raise. Issuer eligibility, collateral availability, and repayment capacity require review.”

Describe Benefits With Their Conditions

A benefit should be connected to the mechanism that could produce it.

More efficient administration Connected systems may reduce repeated entry and coordinate ownership records and distributions Transfer controls Properly configured systems can check specified conditions before processing transfers Price discovery Actual transactions may provide evidence of what participants are willing to pay Possible secondary trading A suitable venue may provide trading access, subject to admission and participation requirements Preservation of particular ownership interests Some structures may avoid issuing parent common shares while creating other obligations Price discovery is the process through which transactions or market activity provide information about an investment’s price.

A small or thinly traded market may provide limited evidence. One transaction does not necessarily establish the value of an entire business or asset portfolio.

A qualification buried in a footnote cannot reliably correct an exaggerated headline. FINRA guidance emphasizes clear presentation and balanced treatment of risks and potential benefits where its rules apply. [R48]

Use Precise Language for Common Claims

exclusions.” Adding “may” or “potentially” does not make an otherwise unsupported statement reliable.

Regulation A permits testing-the-waters communications under specific conditions. Required notices apply, and after public filing, materials must provide the required connection to the current preliminary offering circular.

Securities cannot be sold before qualification. [R01]

closed

Follow the updated communication instructions

Do not accept investor money, binding purchase commitments, or subscription documents outside the authorized process.

An SDR should not improvise required offering notices from memory.

Control Materials and Versions

An approved material is a document or message authorized for a specified use through the organization’s applicable review process.

A version identifies a particular edition of that material. Each reusable item should identify: Its owner; Its version or revision date; Its intended audience; Its permitted use; Its review status; Any expiration or required update.

Example: Document: Issuer Services OverviewAudience: Prospective issuer executivesVersion: 3.2Permitted use: Initial business-development discussionsOwner: Commercial operations Approval for issuer outreach does not automatically authorize use with prospective investors.

Changes to returns, fees, provider identities, regulatory status, trading claims, or investor rights should return to the appropriate reviewer.

For example, “guaranteed liquidity” remains a significant claim whether it appears in a slide deck or a ten-word text message.

Use approved systems so communications can be supervised and retained where required. Exact retention periods and approval requirements should come from the responsible organization’s policy and applicable obligations.

• Are provider names and roles correct?
• Are amounts, dates, and transaction status supported?
• Are proposals clearly distinguished from commitments?
• Does the content accurately describe investor rights?
• Does it make an unsupported claim about returns, liquidity, valuation, or approval?
• Has confidential information been handled through an authorized system? Do not allow an automated agent to invent an answer when the correct response requires specialist review.

Approved fallback: “That depends on the proposed terms and provider arrangements. I can route the question to the responsible specialist.” AI-generated notes also need review before becoming the official handoff record.

Regulation FD, meaning Fair Disclosure, addresses certain selective disclosures by covered issuers to specified recipients. It generally requires simultaneous public disclosure for intentional covered disclosures and prompt public disclosure for nonintentional ones. Its application and exceptions require legal review. [R42]

If a prospect begins sharing potentially sensitive information

“Before we discuss nonpublic transaction details, let’s confirm the appropriate confidentiality and information-handling arrangements with your counsel and our designated contact.” If the information has already been received: Restrict further sharing; Notify the designated legal or compliance contact promptly; Preserve the relevant communication through the approved process; Follow instructions about access, use, and any trading restrictions.

An SDR should not independently decide to publish the information or conclude that a confidentiality agreement resolves every issue.

requirements

methodology

Valuation specialist and finance team

Trading admission, order handling, or venue status

Trading operator and its compliance team

Ownership records or transfer processing

Transfer agent or designated recordkeeping team

Custody, keys, recovery, or asset access

Custody and operational specialists

Provider contracts, fees, or commercial commitments

Authorized commercial and legal personnel

Suspected fraud, unauthorized instructions, or security incident

Designated compliance, security, and legal contacts

These are primary routes. A question may require several teams. SDR response: “That question affects the transaction’s terms, so I want the responsible specialist to address it directly. I’ll provide the context and coordinate the next step.”

include?

Payment instructions appear to have been altered

Can a proposed security use a particular venue?

Incorrect investor materials are being actively distributed

What documents will counsel need? Potential MNPI has been sent to unauthorized recipients How are distributions administered? A holder reports unauthorized transfers or loss of asset access Use the organization’s incident process for urgent matters. The SDR should preserve facts and notify the designated responder without trying to investigate or repair the issue independently.

Make the Escalation Actionable

A useful escalation includes: The exact question or statement; The audience and communication channel; The transaction stage; The supporting source or document; What has already been communicated; The deadline or immediate exposure; The decision or response needed.

This reduces repeated questioning and helps the reviewer assess the issue quickly.

Correct Material Errors Promptly

A material communication error is an inaccurate or incomplete statement that could meaningfully affect the recipient’s understanding or decision.

Examples include an incorrect funding guarantee, provider identity, regulatory status, or liquidity claim.

Do not quietly replace a significant claim and assume prior recipients will discover the correction. The scope and timing of any broader notification should be determined by the responsible team.

Record Conversations Accurately

A CRM, or customer relationship management system, is the system used to record prospects, interactions, and next steps.

A useful call record includes: Participants and date; Business objective; Management-stated facts; Materials shared; Questions requiring review; Commitments actually made; Contact preferences; Agreed next step.

Example: “CFO asked whether a $20 million IP appraisal could increase reported assets and market capitalization. SDR explained that valuation, GAAP recognition, and market price are separate. Accounting and legal review requested. No accounting conclusion provided.” Avoid notes such as: “CFO approved the tokenization plan.” unless the actual approval, authority, and scope are documented.

Record retention and access should follow the relevant organization’s requirements.

Question Required review

What rights would the token represent?

Securities counsel and transaction team

What does the appraisal establish? Valuation specialist

Can an asset be recognized or remeasured?

Accounting team and auditor

Is trading available? Relevant venue operator

Is there a contractual exit mechanism?

Counsel and finance team

Appropriate SDR response: “The appraisal, accounting treatment, investment rights, and trading arrangements need separate evaluation. Tokenization does not automatically change accounting recognition or guarantee an investor exit. We can coordinate a discussion with your CFO, counsel, and the relevant specialists.”