The Financial Industry Regulatory Authority (FINRA) has issued guidance to securities firms and brokers regarding the use of social networking Web sites. The details are found within the FINRA Regulatory Notice 10-06, which addresses the recordkeeping, supervision and responsibility of firms’ access and use of social networking websites like Facebook, Twitter and LinkedIn.

In the Notice, FINRA emphasizes that each firm must develop its own procedures and policies and mentions that some technology providers have systems that enable the ability to retain records of communication made through social networking sites. While FINRA does not endorse any particular technology, using this kind of system is critical for firms communicating via social media. FINRA states “every firm that intends to communicate, or permit its associated persons to communicate, through social media sites must first ensure that it can retain records of those communications as required by Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and NASD Rule 3110.”

FINRA Regulatory Notice 10-06 works to clarify situations that may arise from the use of social networking websites. The notice goes into detail on how social media communication affects record-keeping, suitability and supervision requirements, and works to provide definition for elements unique to the medium. For example, if a customer or other third-party posts content on a social media site established by the firm or its personnel, does FINRA consider the third-party content to be the firm’s communication with the public under Rule 2210? Generally no, but under certain circumstances they can become attributable to the firm. It depends on whether the firm has involved itself in the preparation of the content and explicitly or implicitly endorsed or approved the content. And while FINRA doesn’t mandate monitoring of third-party posts, it does offer best practices on page 8 of the .pdf document.

Social media archiving from Smarsh gives securities firms and brokers the ability to be compliant with FINRA’s guidance. Messages and “tweets” are preserved and indexed, and an audit trail captures data on every visual inspection. Customizable organization usage reports and evidence of supervision/policy enforcement can be produced on-demand in seconds.