FINRA Issues Further Guidance on Social Networking Websites and Business Communications – Overview of Requirements

  • By: Staff Editor
  • Date: September 16, 2011
Webinar All Access Pass Subscription

In January 2010, FINRA issued Regulatory Notice 10-06 that provided guidance to business on how FINRA rules applied to communications with the public through social media sites. These guidelines addressed requirements pertaining to recordkeeping, suitability, supervision and content requirements for such communications.

Businesses however raised further questions regarding the applicability of the rules and FINRA issued further guidance on the issue, especially with respect to new technologies.
FINRA requirements for communications through social networking
FINRA says that only that communication which has content that refers to business should be kept on record.
The Securities Exchange Act of 1934 requires “broker-dealers to preserve certain records for a period of not less than three years, the first two in an easily accessible place.”
Records should include:
  • Originals of all communications received and copies of all communications sent (and any approvals thereof) by the member, broker or dealer (including inter-office memoranda and communications) relating to its business as such.
  • Each firm has to establish and maintain a system to supervise the activities of each associated person to ensure compliance with regulations
  • A registered principal must review any social media site prior to an associated person using it for business purpose
  • The registered principal may approve a social media site for business use only if he/she has determined that the associated person can and will comply with all applicable federal regulations and internal controls
  • Online chats and discussions on forums need not be pre-approved as FINRA considers this sort of interaction to be come under the category of “public appearance” under NASD Rule 2210.
  • Firms should, however, adopt post-use review procedures over such online interactive chats and discussions. This must be done in order to ensure such communications don’t violate any regulations.
  • A static, non-interactive posting is considered an advertisement by FINRA and has to be pre-approved by a registered principal.
Need to learn how to manage social networking in regulated environments? Then attend the following ComplianceOnline webinars:    
Links to third-party sites
  • Firms should not link to third party sites that they know contains false or misleading content.
  • Firms should not link to such sites from their own websites if there are any red flags to indicate that the site has false and misleading content.
  • Firms are responsible under NASD 2210 for content on a third party site it has linked to and seems to endorse by providing such a link.
Data feeds
  • Firms must adopt procedures to manage data feeds to their own websites.
  • Firms must be aware of the proficiency of the data vendor and the accuracy of the data at the time it’s presented on the firm’s website.
  • Firms should regularly review these data feeds for any indications that the data may be inaccurate and take immediate steps to rectify this.
Use of electronic devices
  • According to the guide, firms should not use technology or devices that automatically erase content of communications, thus violating recordkeeping regulations.
  • Firms may permit their associated persons to use any personal communication device, whether it is owned by the associated person or the firm, for business communications.
  • The firm must be able to retain, retrieve and supervise business communications regardless of whether they are conducted from a device owned by the firm or by the associated person.
Additional Resources


Best Sellers
You Recently Viewed