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.
Marianna is an adjunct professor and lecturer of Law at New York Career Institute, where she teaches Law Office Management and Real Estate Law. She earned her J.D. at Nova Southeastern University, and a B.B.A. degree in marketing from Baruch College.
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