Wednesday, January 27, 2010

FINRA Issues Guidance on Blogs and Social Networking Web Sites

This week, FINRA -- the largest independent U.S. securities regulator -- issued Regulatory Notice 10-06, Guidance on Blogs and Social Networking Web Sites. The Executive Summary provides:
Americans are increasingly using social media Web sites, such as blogs and social networking sites, for business and personal communications. Firms have asked FINRA staff how the FINRA rules governing communications with the public apply to social media sites that are sponsored by a firm or its registered representatives. This Notice provides guidance to firms regarding these issues.
The regulatory guidance helps brokerage firms understand how they may appropriately utilize social media sites for business purposes, while also ensuring investor protection.  In its guidance (laid out in Q&A format), FINRA:
  • Discusses a brokerage firm's recordkeeping duties, saying firms must retain all business-related communications made by their "associated persons" via online interactive media sites like Facebook, Twitter, and blogs (referring to Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and NASD Rule 3110).
  • Discusses when communications by a firm or its personnel on social media sites might constitute a "recommendation" and potentially trigger the so-called FINRA "suitability rule" (requiring additional disclosures).
  • Describes types of interactive electronic forums, such as participation in an interactive electronic forum like chat rooms or online seminars (and sometimes blogs and social networking sites).  Although a registered principal may not have to pre-approve communications made in an interactive electronic forum, those forums are still subject to other supervisory requirements and the content requirements of FINRA’s communications rule.
  • Clarifies a brokerage firm's responsibilities with regard to supervising use of social media sites by its "associated persons," getting into some specific duties and required policies and procedures.
  • Addresses issues related to third-party posts on a firm's social networking site.  
Please see the regulatory notice for more information. FINRA is also offering a webinar on February 3, 2010 on the new guidance "Compliance Considerations for Social Networking Sites."

1 comment:

  1. Firms interested in learning more should check out the Companion Guide to FINRA Social Networking Compliance It picks up where Notice 10-06 leaves off, offering additional detail on social networking considerations and a checklist of requirements for choosing a social networking compliance vendor.