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MobilWebApps-GettyImages-484543671-600pxBroker-dealers have been reluctant to fully embrace social media due to regulatory concerns. Although the industry regulator, the Financial Industry Regulatory Authority, Inc. (“FINRA”), has issued regulatory notices relating to the use of social media and the application of FINRA Rule 2210 (Communications with the Public), many gray areas have remained, dampening the use of Facebook, LinkedIn and other social media platforms by industry participants.

FINRA’s recent release of Regulatory Notice 17-18 may help to remedy that problem, however. Presented in the form of 12 FAQs commenting on the earlier regulatory notices, this latest notice provides the broker-dealer industry with greater guidance on its use of social media to communicate with customers and potential customers. Specifically, the FAQs expand on the areas of recordkeeping, third-party posts and the use of hyperlinks to third-party sites. FINRA acknowledged that the use of social media and digital communications has expanded in the time since its last regulatory notice on the use of social media by member firms, which was Regulatory Notice 11-29, issued in 2011.

Recordkeeping

The requirement that member firms retain records of communications that relate to their “business as such” under Rule 17a-4(b) of the Securities Exchange Act of 1934 applies to digital communications, including those that are made through text messaging and chat services, if the content of the communication relates to the firm’s business. Before using such services, the firm must first ensure that it can retain those business communications.…
Continue Reading FINRA Publishes New Guidance on Social Networking Websites and the Application of Rule 2210

Acknowledging the growing demand by consumers for information through social media, the Division of Investment Management set some ground rules on how investment advisers can use social media and publish advertisements featuring public commentary about them from social media sites.

Under the new rules, investment advisers may refer to commentary published in social media without violating the rule prohibiting publication of client “testimonials” if the content is independently produced and the adviser has no “material connection” with the independent social media site. While not a bright line in the sand, the distinction goes a long way to clear up this murky area of the law.…
Continue Reading New Regulatory Guidance on Use of Social Media by Investment Advisers

The announcement by a Wall Street firm that it plans to give its financial advisers limited access to social media websites has been viewed by many as inevitable.  Morgan Stanley’s foray into the fast-changing world of social media highlights the difficulties faced by broker-dealers and investment advisers and the regulators who oversee them.  As more…