New Rules from FINRA: Financial Services Sector and SM Compliance

The new guidelines attempt to add more clarity, providing more details for securities firms on appropriate social media use. While they still don’t exactly make it easy for firms to explore social media with total peace of mind – it’s impossible for FINRA to lay out every possible scenario in black/white terms – they do provide more clarity. See the new guidelines here.

Below are a few of the highlights that we took away from the notice:

  • Firms may not establish a link to any third-party site that the firm knows or has reason to know contains false or misleading content.” This means that when sharing information on Twitter and creating blog roles, it’s important for those linking to outside content to be confident in the source. This may lead to advisors and brokers simply sharing only their own content and dropping outside sources. The guidelines are a bit vague here, as they also say a firm is only responsible for third-party content that they have linked to if the firm has adopted or has become entangled with its content, so our recommendation would be to tread carefully.
  • “The obligations of a firm to keep records of communications made through social media depend on whether the content of the communication constitutes a business communication.” So, for the advisor or broker that wants to participate in an active social media community – be it Facebook or Google Plus – solely for personal use, then the company doesn’t need to monitor/record their activities. But, we’d caution that it’s best to avoid any mention of employers on these sites, just to erase any doubt that the communications are not for business.
  • (For) any social media site that an associated person intents to employ for a business person…the registered principal must review (the site) in the form in which it will be launched.” For example, advisors and brokers must have their LinkedIn profile approved by their registered principal – but not each LinkedIn “post.” These “interactive electronic forums” are considered a “public appearance,” so while they don’t require prior approval, they should be monitored, post-reviewed and recorded by the firm. It’s important to note that flexibility does not extend to more static online materials such as websites or blogs. Those communications are classified as advertisements and do need to be reviewed by the registered principal.
  • In determining whether a communication is subject to the recordkeeping requirements…(this) depends upon the facts and circumstances…the content of the communication is determinative.” Essentially, this means that brokerage firms must keep records of all communications by their employees, even if they are made via a personal device such as a laptop, smart phone or IPad.
  • A firm must conduct appropriate training and education concerning its policies, including those relating to social media. Firms must follow up on “red flags” that may indicate that an associated person is not complying with firm policies.” In particular, these trainings must deal with the distinction between personal and business communications. Firms should institute well documented and repeatable training programs that clearly outline their policies, in addition to having written social media guidelines for all employees.


What else did you take away from the guidelines? What do you expect the impact to be on the industry?


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