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Many financial services firms still struggle to understand and fully embrace social media and mobile communication rules. In light of the emerging technologies and communications, FINRA recently published Regulatory Notice 17–18: Social Media and Digital Communications, providing further guidance on the FINRA rules governing social media and text messaging communications for member firms.
FINRA’s updated guidance further clarifies the rules governing communications with the public via social media, and the use of personal devices for business communications. The Notice also reminds firms of the recordkeeping, supervision, and content requirements for such communications.
Here are some important takeaways:
- Recordkeeping. Firms are reminded of their obligation to keep records of business communications under SEA Rule 17a-4(b)(4). Also, firms must train and educate their advisors regarding the distinction between business and personal communications, and the requirements to retain, supervise and produce business communications.
- Text messaging. Firms that communicate or allow advisors to communicate through text messaging or chat services for business purposes must retain records of those communications, in compliance with SEC and FINRA rules.
- Personal communication. Advisors can share firm information that is not related to their firm’s product or services without becoming subject to FINRA Rule 2210. For example, an advisor may share their firm’s post about a charity event that the company sponsors. However, if the communication does pertain to the firm’s products and services, then the content is subject to FINRA Rule 2210.
- Third-party content. Regulatory Notice 10–06 states that posts by customers or other third-parties on a firm’s social media accounts are not considered ‘communications with the public’ by the firm or advisor, under FINRA Rule 2210. Regulatory Notice 17–18 reiterates this point. However, there are some exceptions, including situations where a firm pays for, prepares, controls, or explicitly endorses content posted by third-parties. In these scenarios, a firm must comply with FINRA Rule 2210.
- Hyperlinks to third-party websites. FINRA reminds firms that Regulatory Notice 11–39 states firms cannot link to any third-party website that contains false or misleading content. The Notice further clarifies that a firm ‘adopts’ third-party content when it shares or links to it, and as a result must ensure the content complies with communications rules.
- Endorsements and testimonials. Unsolicited third-party comments or opinions posted on a firm’s social media aren’t firm communications, or testimonials under FINRA Rule 2210. However, if the firm or advisor likes or shares a comment/testimonial, that is considered adoption of content, and is subject to the communications rules.
- Note: Registered Investment Advisors should still comply with SEC Rule 206(4), which prohibits promotion of client testimonials and endorsements.
- Native advertising. Firms may use native advertising if it complies with the provision of FINRA Rule 2210. In particular, native advertising must disclose the firm’s name, disclose any relationship between the firm and any other entity or individual who is also named, and mention the products or services offered by the firm.
What does this mean for firms?
FINRA makes it clear that firms must archive all electronic communications, including content from social media, text messaging, and other mobile platforms.
In response to the guidance, firms should review their social media and mobile policies and procedures. Specify the difference between personal communications and business communications. Training and ongoing education are critical, especially as advisors become acclimated to social media, text messaging and mobile apps to communicate with prospects and clients.
The digital landscape continues to evolve and firms must leverage technology for compliance and supervision. Smarsh provides the tools and platform to capture and supervise all incoming and outgoing business communications. It’s simply not realistic or cost effective for a firm’s compliance officer to manually spot check all of their firm’s social media profiles and mobile messages. The Archiving Platform from Smarsh automatically captures social media and mobile content in its native format and flags communications based on client-set lexicon policies if further review is needed. As a result, a compliance officer can focus their time and energy on the most pressing items for review, rather than searching for risk in all the wrong places.
As an advisor, do you have one or more accounts on social media platforms, such as Twitter, Facebook or LinkedIn?
If so, are you ready for the SEC’s adopted amendments to Form ADV and the Advisers Act books and records rule?
Registered investment advisors filing an initial Form ADV or an amendment to an existing Form ADV on or after October 1, 2017 will be required to provide responses to the adopted form revisions. This includes the new requirement that advisors disclose their firm’s social media platforms in Section 1.I of Schedule D in Form ADV.
The change in social media disclosure signifies a big shift in the way that the SEC will approach and evaluate an advisor’s risk profile.
What’s the big deal?
Up until now, advisors only needed to list their corporate websites on Form ADV. However, advisors will now be required to list all their corporate social media accounts, including corporate social media pages and other publicly-available, business-related profiles on LinkedIn, Twitter, Facebook, and so on.
This has implications for an advisor’s compliance procedures and risk exposure. The specific inclusion of social media signifies the SEC will heavily scrutinize an advisor’s corporate social media accounts during an examination or audit, which is stated in the final Form ADV and Investment Advisers Act Rules.
It’s not too late to prepare
Now that social media accounts are under the microscope, it’s critical that advisors archive and supervise their corporate accounts. The SEC will ask for social records, so firms must find the most efficient and thorough way to retain and produce this type of content.
A comprehensive archiving platform provides the solution that allows firms retain and produce social media alongside other frequently requested communication records, including email, text messages, and website content. Records can be located and produced quickly in the event of an examination, so regulators can review social media conversations and information exchanged with clients or prospects across various communications channels.
For instance, if a conversation between an advisor and a prospective client starts on a website, moves to email, and concludes on Facebook, records within a firm’s comprehensive archive will show the entire interaction with across multiple content channels.
If you use Facebook, Twitter, LinkedIn, or any other publicly-available social media platform to communicate with clients and prospects, now is the time to revisit your social media policies and recordkeeping processes and ensure they are ready for regulatory scrutiny.
Lenders are already managing a long list of other industry rules and regulations, so these extra cycles of website and social media monitoring can have a significant time and cost impact on a business, if not managed efficiently with smart policies, and some help from technology.
With no room for error, how can you keep your marketing engines revving while you stay on course with the regulations? The key to success is automation.
- Why it’s important to set up policies and training for social media and websites
- How to use technology to automate the supervision of your digital presence
- Keys to refining you monitoring process over time
The popularity of text messaging is growing every year, and many employees and their clients now expect to use it as a tool to conduct business.
Prohibiting the use of text messages is not only unsustainable for an increasingly mobile workplace, but it also does not protect your organization from risk — it simply hides risk where you can’t see and manage it.
- How to handle any compliance or policy challenges of text messages
- Why your organization’s device ownership scenario matters, and how to choose the right one
- How to account for text messaging in your policies, and use technology solutions to manage risk