FINRA issues social media guidelines

In response to questions from financial services firms, FINRA recently issued guidelines for advisors who use social media sites like Facebook, Twitter and LinkedIn. The notice, Regulatory Notice 10-06, emphasizes personal responsibility on the part of individual advisors and firms, calling on each firm to "develop policies and procedures that are best designed to ensure that the firm and its personnel comply with all applicable requirements," adding that guidelines should be considered within the context of each firm's own business, and in keeping with its own regulatory bodies.

The agency is guarded in its approval for advisors' use of such sites, saying "FINRA does not endorse any particular technology to keep such records, nor are we certain that adequate technology currently exists."

Guidelines in the Notice encompass recordkeeping and suitability. For example:

• Every firm that intends to use social media sites to communicate with the public 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."
• If a firm or its personnel recommends a security through a social media site, it will trigger suitability requirements in NASD Rule 2310; however, whether or not a particular communication will be considered a "recommendation" will depend on the "facts and circumstances of the Communication." The Notice points advisors to the NASD Notice to Members (NTM) 01-23 for extensive examples of communications that would be considered "recommendations."
• Blogs with static content are considered an "interactive electronic forum" under Rule 2210 posts require prior principal approval; however, if a blog contains real-time interactive communications, that portion need not be approved prior to posting.
• While third-party posts are generally not subject to Rule 2210, if the firm or advisor appears to endorse such comments, or was involved in the preparation of the comment, they may be attributable to the firm.