Since last year’s issuance of FINRA’s Regulatory Notice 10-06, many firms have raised questions regarding the application of the rules. Well, FINRA has finally responded with an additional notice that responds and clarifies the application of the rules to new technologies.
Here’s our take on Regulatory Notice 11-39
: Social Media Websites and the Use of Personal Devices for Business Communications – Guidance on Social Networking Websites and Business Communications. (Keep in mind that Notice 11-39 is not a new set of rules, but rather acts as an addendum to Notice 10-06)
The obligations of a firm to keep
records of communications made through social media
depend on whether
the content of the communication constitutes a business communication.
The key to this statement is ensuring that every firm determines what
is and isn’t a business communication
, as well as implementing measures
that require any business communication made by an associated firm
member be retained, retrievable and supervised.
The main question here
is what constitutes a business communication? According to FINRA, firms
must develop policies and procedures that include training regarding
the difference between business and non-business communications to
enable appropriate compliance.
A registered principal must review
prior to use any social media site that an associated person intends to
employ for a business purpose. In order for the social media site to be
approved, the registered principle must determine that that the
associated person can and will comply with all applicable FINRA rules,
the federal securities laws, including recordkeeping requirements, and
any additional requirements established by the firm.
With regards to
unscripted participation in an interactive electronic forum (such as
status updates and commenting on a Facebook
participation is considered a public appearance and does not require
prior approval, although firms should adopt supervisory procedures in
order to stay within content requirements set forth by FINRA and the
Links to third-party sites
Firms may not
establish a link to any third-party site that the firm knows or has
reason to know contains false or misleading content. Firms are
responsible for third-party links in the following circumstances: direct
links to the website, third-party content adoption through
endorsements, and participation in the development of third-party
So when are firms not responsible for third-party content to
which it links? If the firm does not adopt or become entangled with
the third-party content, as well as if the firm does not know that the
third-party site contains false or misleading information. If you find
that your firm’s website has become entangled with an inappropriate
third-party site you can block or delete the content in order to remain
Firms must adopt procedures
data feeds into their own websites. In other words, if firms or
representatives of the firm wish to add RSS feeds to their networks they
must ensure that each feed is in accurate and functioning in a
reasonable matter. The good news is that FINRA understands the
situations where firms have received inaccurate data from feeds – just
be sure to follow procedures in which you block, delete and record the
feed in order to remain compliant.
The final topic that FINRA addresses is the use of personal devices
for business communications. Due to the development of new technologies
and their ability to aid persons of the firm to perform their duties as
well as serve their clients, FINRA permits the use of any personal
The two caveats? The firm representative must
have the ability to retain, retrieve and supervise the communication,
which must be of a business matter. The bottom line? Regardless of
whether a person is communicating on social networks via a smart phone,
iPad or computer, they must archive their business communications
The nice part about FINRA’s Regulatory Notice 11-39
is that it includes a list of questions and answers at the end that
address specific topics regarding their rules and guidelines. If you
find any of FINRA’s policies confusing or unclear, feel free to drop us a
line – we have a social media compliance guide built from FINRA’s Regulatory Notice 10-06, and are educated in all matters regarding social media compliance in the financial industry.
To be notified next time I post an article, please click the “Follow” button below my headshot in the top left corner.