Compliance brief: Analyzing FINRA’s Regulatory Notice 11-39

By Amy McIlwain

Financial Social Media Marketing


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)

Recordkeeping

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.

Supervision

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 or LinkedIn post), 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 SEC.

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 content.

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 compliant.

Data feeds

Firms must adopt procedures to manage 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 communication device.

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.

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