FINRA Weighs In On Social Networking

January 26, 2010 at 07:00 PM

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The Financial Industry Regulatory Authority has put out new guidance regarding use of social networking websites such as Facebook, Twitter and LinkedIn by FINRA member companies and those companies' brokers and reps.

In Regulatory Notice 10-06, FINRA, Washington, says firms need to supervise use of such sites by their "associated persons" for public communications, in order to ensure that recommendations are suitable and customers are not misled.

The notice also covers recordkeeping and other responsibilities.

Some sample guidelines:

- 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.

- FINRA considers static postings to a blog to constitute "advertisements," and a firm or its registered representative that sponsors such a blog must obtain prior principal approval of any such posting.

- If a blog engages in real-time interactive communications, FINRA would consider the blog to be an interactive electronic forum that does not require prior principal approval but that must be supervised.

The Insurance Marketplace Standards Association, Bethesda, Md., is pleased that FINRA is addressing regulatory challenges presented by social networking regarding supervision, advertising, and books and records requirements, says IMSA President Brian Atchinson. "These have been core areas of focus for IMSA's market conduct and social media initiatives," he says.

FINRA Chairman Rick Ketchum says FINRA wants to "ensure that firms and brokers use social networking sites in an appropriate manner."

Click here to view Notice 10-06.

Click here to view FINRA's earlier posted Guide to the Internet for Registered Representatives, which deals with related matters.

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