INSIGHTS

On September 22, 2011

FINRA Social Media Notice 11-39

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Last month, FINRA issued additional guidance on social networking and business communications with the release of Regulatory Notice 11-39: Social Media Websites and the Use of Personal Devices for Business Communications. This highly anticipated regulatory notice is designed to complement and clarify Regulatory Notice 10-06 issued in January 2010. The original notice focused on applying FINRA’s rules regarding communications with the public to social media and offered a general discussion on recordkeeping, supervision, suitability and content requirements for social media communications. While there were no major surprises in the new Notice, it does answer many of the questions advisors have had regarding the application of these policies. Here are some of the highlights:

Recordkeeping
Recordkeeping requirements for social media communications are dependent on the content and whether or not it constitutes a business communication. A firm is required to maintain records of all social media communications related to its business, regardless of whether employees are using a firm-issued or personal device. The content of the online communication is the determining factor. FINRA stresses that firms should clarify what constitutes a business communication in their employee training and implement appropriate policies and procedures to ensure these communications are maintained and supervised.

Supervision
Firms must maintain a system to supervise social media business communications, including pre- and post-review processes for static or interactive content. According to FINRA, a registered principal must review and approve an associated person’s proposed social media site in the form in which it will be launched. Firms should develop appropriate training and education for their employees and institute monitoring processes to ensure policies are being followed.

Third-party posts, links and websites
A link to an independent third-party website may be established without assuming responsibility of that site’s content as long as the firm does not adopt or become entangled with the content and does not believe the site contains false or misleading information. FINRA goes on to state that if a third party posts a business-related communication on a personal social media site, an associate may respond to the comment provided that they do not violate any of the firm’s existing policies concerning such participation. FINRA continues by clarifying that a firm may block or delete certain types of content to ensure appropriateness without being considered to have adopted the content.

Data Feeds
Firms should establish procedures for managing website data feeds. These procedures should be reasonably designed to ensure that data can be verified make sure the content is timely and accurate. Firms must promptly correct data that is erroneous when posted or as it becomes inaccurate over time.

The Use of Personal Devices
FINRA discusses the use of personal devices for business communications and allows for their use as long as the firm can retain, retrieve and supervise all business communications. Firms should have the ability to separate business and personal communications. If a firm is able to separate personal and business communications, and has adequate social media policies and procedures in place regarding usage thereof, then the firm is not required to supervise the personal emails made on these devices.

No doubt social media is here to stay. Despite FINRA’s additional guidance, there are still many questions regarding regulatory interpretations for social media communications. Advisors should consult their compliance department about their firm’s specific social media policies.

Advisors and registered representatives should consult their firm’s social media policies and Compliance Department before participating in any interactive communications.

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