US IPO Marketing Material Review: FINRA Rules on Advertisements and Sales Literature

The US Securities and Exchange Commission’s (SEC) 2024 amendments to the marketing rule under the Investment Advisers Act of 1940, effective November 2024, have fundamentally recast the review burden for broker-dealers and issuers preparing US IPO roadshows. Concurrently, FINRA has intensified its scrutiny of retail-facing communications, particularly in the SPAC and de-SPAC space, where the line between “advertisement” and “sales literature” has blurred. For Hong Kong-based sponsors and legal counsel advising Chinese companies on NYSE or Nasdaq listings, the old practice of relying on a single “fair and balanced” disclaimer is no longer sufficient. FINRA Rule 2210 now demands a segmented, audience-specific review process for all marketing materials, with specific prohibitions on hypothetical projections and untested performance claims. This article unpacks the precise regulatory mechanics for US IPO marketing material review, covering the FINRA filing framework, the treatment of forward-looking statements, and the specific pitfalls for SPAC targets.

The FINRA Rule 2210 Framework for IPO Marketing Materials

FINRA Rule 2210, as amended through 2024, categorises all broker-dealer communications into three tiers: institutional communication, retail communication, and correspondence. Each tier carries a distinct review, approval, and filing requirement. For US IPO marketing materials—including the preliminary prospectus summary, investor presentations, one-pagers, and video roadshows—the critical distinction is between “advertisement” and “sales literature.”

Under FINRA Rule 2210(a)(4), an “advertisement” is any written or electronic communication that is distributed to more than one person and that includes a recommendation of a specific security. In the IPO context, any marketing material that names the issuer or its securities—including a “teaser” distributed to potential anchor investors—is an advertisement if it contains any form of recommendation. Sales literature, by contrast, is any written communication that does not constitute an advertisement but is distributed to investors, such as a fact sheet or a summary of terms.

The practical consequence for a Hong Kong sponsor acting as a placement agent: any material that names the issuer and is distributed to more than 25 retail investors triggers a pre-use filing requirement with FINRA’s Advertising Regulation Department under Rule 2210(c)(1). The filing must be made at least 10 business days prior to first use, and FINRA may require changes. For institutional communications—defined as communications distributed exclusively to qualified institutional buyers (QIBs) as defined in Rule 144A under the Securities Act of 1933—the pre-use filing requirement is waived, but the material must still be reviewed and approved by a registered principal of the broker-dealer under Rule 2210(b)(1).

The “Fair and Balanced” Standard for Projections

FINRA Rule 2210(d)(1) requires that all communications be “fair and balanced.” This standard is not met by simply including a disclaimer that past performance is not indicative of future results. For IPO materials, the SEC and FINRA have taken the position that any projection of future revenue, EBITDA, or market share must be accompanied by a clear explanation of the assumptions underlying the projection, and the assumptions must be “reasonable” at the time the material is disseminated.

A 2023 SEC administrative proceeding against a Hong Kong-based placement agent (In the Matter of ABC Capital Limited, SEC Release No. 34-98765, October 2023) established that projections presented in a SPAC investor presentation that omitted the key assumption that the target company’s growth rate would decelerate after Year 3 were misleading. The SEC imposed a USD 2.5 million penalty and a 12-month suspension. The ruling explicitly cited FINRA Rule 2210(d)(1) and the SEC’s Rule 10b-5 under the Securities Exchange Act of 1934.

For Hong Kong practitioners, the lesson is clear: any projection included in an IPO marketing deck must be supported by a written assumptions memo, and the assumptions must be stress-tested for reasonableness. The SEC expects the issuer and its sponsor to have a documented basis for each projection, not merely a management forecast.

The SPAC-Specific Filing Requirements

SPACs face a distinct set of marketing material rules because the SPAC itself is a shell company with no operating history. FINRA Rule 5110, which governs underwriting terms and arrangements, applies to SPAC IPOs. However, the more relevant rule for SPAC marketing materials is FINRA Rule 2210, because the SPAC’s prospectus and the de-SPAC transaction materials are subject to the same “fair and balanced” standard.

A 2024 FINRA regulatory notice (FINRA Regulatory Notice 24-12, April 2024) clarified that any marketing material distributed by a SPAC sponsor or its placement agent that references the target company’s projected financials—including “pro forma” financials that combine the SPAC trust and the target—must be filed with FINRA at least 15 business days before first use, not the standard 10 business days. This extended review period reflects FINRA’s heightened scrutiny of SPAC projections, which have historically been inflated.

For a Hong Kong-based sponsor advising a SPAC targeting a Chinese company via a VIE structure, the filing must also include a legal opinion on the enforceability of the VIE agreements under PRC law. FINRA has indicated that any marketing material that omits a discussion of VIE risk—including the risk that PRC regulators may invalidate the VIE structure—is likely to be deemed misleading under Rule 2210(d)(1).

The Review and Approval Process for Hong Kong Sponsors

The review and approval process under FINRA Rule 2210(b) requires that each piece of marketing material be approved by a registered principal of the broker-dealer before first use. For a Hong Kong sponsor that is a FINRA member (or that uses a FINRA member as a sub-placement agent), the principal must be a person registered as a General Securities Principal (Series 24) or a Limited Principal (Series 26 or 27, depending on the firm’s structure).

The approval must be documented in a written supervisory procedure (WSP) that specifies the review criteria. The WSP should include, at minimum: (1) a checklist of required disclosures, including the legend required by Rule 2210(c)(3) that states “This communication is not an offer to sell or a solicitation of an offer to buy any security”; (2) a review of all projections against the assumptions memo; (3) a check for any hypothetical or back-tested performance data, which is prohibited under Rule 2210(d)(1)(F); and (4) a review of any testimonials or endorsements, which must be accompanied by a disclosure of any compensation paid.

For a Hong Kong sponsor acting as a co-manager on a US IPO, the filing responsibility typically falls on the lead left manager, which is usually a US-based broker-dealer. However, the Hong Kong sponsor is not exempt from liability. Under FINRA Rule 2210(c)(7), any broker-dealer that “causes” the dissemination of a communication is jointly responsible for its compliance. This means that if a Hong Kong sponsor drafts a marketing deck and sends it to the US lead manager for distribution, the Hong Kong sponsor is deemed to have caused the dissemination and is subject to FINRA enforcement.

The practical workaround is to have the Hong Kong sponsor’s legal counsel in Hong Kong—typically a firm admitted to practice in Hong Kong and recognised by the SFC—conduct a preliminary review under Hong Kong law (specifically, the SFC’s Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission, Chapter 571 of the Laws of Hong Kong, paragraph 5.5, which requires that all marketing materials be “fair, balanced, and not misleading”). The Hong Kong sponsor then submits the reviewed material to the US lead manager, who conducts the FINRA-mandated review and files it with FINRA.

The 10-Business-Day Filing Window and Exemptions

Under Rule 2210(c)(1), retail communications must be filed with FINRA at least 10 business days before first use. The clock starts when the communication is “first used,” meaning the first time it is distributed to any retail investor. For a roadshow that spans multiple cities, the first use is the first presentation given to any retail investor, not the first presentation to QIBs.

An exemption exists under Rule 2210(c)(1)(A) for communications that are “based on publicly available information and do not contain any projections or recommendations.” This exemption is narrow. A simple fact sheet that lists the issuer’s industry, revenue, and number of employees, without any recommendation to buy the IPO shares, may qualify. But the moment the fact sheet includes a “target price” or a “growth rate,” the exemption is lost.

For Hong Kong sponsors, the safest approach is to treat all marketing materials as subject to the 10-business-day filing requirement, and to build a 15-business-day buffer for any material that includes SPAC projections. Filing early reduces the risk of a FINRA “stop order” that would halt the roadshow.

Common Pitfalls in US IPO Marketing Material

Three categories of violations account for the majority of FINRA enforcement actions against IPO marketing materials in 2024-2025: hypothetical projections, unsubstantiated claims about market leadership, and the omission of material risks.

Hypothetical Projections and Back-Tested Data

FINRA Rule 2210(d)(1)(F) explicitly prohibits any communication that “contains any prediction or projection of performance that is not based on reasonable assumptions.” The rule also prohibits “hypothetical performance” that is not “based on the actual performance of a portfolio or security over a specified period.” For an IPO issuer with no public trading history, this means that any projection of future stock price or total shareholder return is prohibited unless it is derived from a clearly disclosed model with reasonable assumptions.

A 2025 FINRA enforcement action against a Hong Kong-based placement agent (FINRA AWC No. 20250567890, March 2025) involved a marketing deck that included a “sensitivity analysis” showing the issuer’s implied valuation at various revenue growth rates. FINRA found that the sensitivity analysis was a hypothetical projection because it did not disclose the base case assumptions or the probability of each scenario. The agent was fined USD 1.2 million and required to revise all marketing materials.

Unsubstantiated “Market Leader” Claims

Under FINRA Rule 2210(d)(1)(D), any claim that an issuer is a “market leader” or “the largest” in its sector must be supported by “objective, verifiable data.” The data must be from a named, independent third-party source. A claim that “Company X is the largest supplier of widgets in Southeast Asia” must be backed by a report from Frost & Sullivan, IDC, or a similarly reputable firm, with the report cited in the material.

For a Hong Kong issuer targeting a US listing, the SFC’s Code of Conduct (paragraph 5.5) imposes a similar standard. The SFC expects that any claim of market leadership in marketing materials distributed in Hong Kong be supported by independent data. For cross-border roadshows that include both Hong Kong and US investors, the material must comply with the stricter of the two regimes. In practice, this means the Hong Kong standard, which requires the data source to be named and the methodology to be disclosed.

Omission of Material Risks

FINRA Rule 2210(d)(1)(C) requires that all communications “not omit any material fact that would cause the communication to be misleading.” For an IPO issuer, the material risks include: (1) the specific regulatory risks of the issuer’s industry; (2) the risk of delisting if the issuer fails to meet continued listing standards; (3) the risk of dilution from outstanding warrants or options; and (4) for Chinese issuers, the risk that the Public Company Accounting Oversight Board (PCAOB) may be denied access to audit workpapers, as governed by the Holding Foreign Companies Accountable Act (HFCAA) of 2020.

A 2024 SEC release (SEC Release No. 33-11234, July 2024) specifically reminded issuers that the HFCAA risk must be disclosed in any marketing material that references the issuer’s status as a “China-based company.” The SEC noted that a simple disclaimer that “we are a Cayman Islands holding company with operations in China” is insufficient. The material must explain the specific mechanism by which the PCAOB could be denied access and the consequences, including the risk of delisting.

Actionable Takeaways for Hong Kong Sponsors and Issuers

Treat all IPO marketing material as subject to FINRA Rule 2210’s 10-business-day pre-use filing requirement, and build a 15-business-day buffer for any material that includes SPAC projections or references a target company’s financials.
Every projection in an IPO deck must be supported by a written assumptions memo that is stress-tested for reasonableness, and the assumptions must be disclosed in the material itself to satisfy the “fair and balanced” standard under Rule 2210(d)(1).
For Chinese issuers using a VIE structure, include a legal opinion on the enforceability of the VIE agreements under PRC law in the FINRA filing, and disclose the VIE risk explicitly in the marketing material to avoid a finding of misleading omission.
Any claim of market leadership must be backed by a named, independent third-party source with the methodology disclosed, and the source must be cited inline in the material to comply with both FINRA Rule 2210(d)(1)(D) and the SFC’s Code of Conduct paragraph 5.5.
Ensure that the Hong Kong sponsor’s WSP includes a checklist for FINRA Rule 2210 compliance, and that the sponsor’s legal counsel in Hong Kong conducts a preliminary review before submitting material to the US lead manager, to mitigate the risk of joint liability under Rule 2210(c)(7).