What type of communications are required when a dealer markets a new issue to investors?

• A. Statements that guarantee performance.
• B. Marketing materials that omit risk disclosures.
• C. Accurate, non-misleading communications that comply with underwriting rules and fairly disclose terms and risk.
• D. Verbal communication only and no written disclosures.

Answer: (C)

When dealers market a new issue to investors, communications must be accurate and not misleading, and they need to fairly disclose the terms and the risks. The underwriter is bound by underwriting rules that govern what can be said about the bond, how terms are presented, and what risk information must accompany the marketing materials. This means materials should reflect the official terms and avoid exaggeration or guarantees—no promises of guaranteed performance. Written disclosures are essential because investors need a complete, reviewable set of information; verbal promises alone are not sufficient or reliable. In short, you want communications that are truthful, properly vetted under underwriting rules, and that clearly and fairly lay out the terms and risks.