In all the articles and blogposts on FINRA and social media, we’ve yet to see a practical, at-a-glance guide that puts it all together they way we like it—on one side of one piece of paper.
We wanted the big picture and the small details. What requires RP approval? How would FINRA treat a private tweet? Can a fund company engage in group discussions on LinkedIn?
How We Did It
So we decided to create it ourselves. First, we pored all the relevant FINRA/NASD Rules, Regulatory Notices, and online content. Then we grouped the features of every major social network according to FINRA’s six “communications categories.” We asked for and received great feedback from a number of LinkedIn groups (thank you all!). Where we could, we inferred how some of the best firms are interpreting FINRA guidelines.
Finally, we ran a first draft by a number of marketing and compliance professionals at firms such as Legg Mason and Bank of America (of course, that’s not an endorsement by any company).
Here’s the result (click for printable PDF). Viewed in color, it chunks up which things require prior approval, supervision, and monitoring.
Sources: NASD Rules 2210, 2211, 2310, 2711, 3010, 3110, IM 2210-1, NASD Notice to Members 99-03, FINRA Regulatory Notices 09-55, 10-06, 07-59, FINRA’s Guide to the Internet for Registered Representatives, and the Investment Advisers Act of 1940 206(4).
As always, we welcome all suggestions for improvement.
What’s new here is the presentation, not so much the implications. But our guide does clarify a few things:
- Almost every activity on social media requires prior registered principal approval
- Interactive e-communications is, for the time being, largely a ghost category. Until FINRA provides more guidance as to what it means, only live chat (e.g. Facebook’s) seems to make the cut.
- Things will get clearer and simpler with time, as everyone gets more experienced on social media and as FINRA reduces the communications categories to as few as three.
We’ve drawn a few lines in the sand, too. Some say retweets could be considered recommendations and therefore shouldn’t be allowed. But TIAA-CREF seems to think otherwise, and we’d agree. Some say tweets are interactive e-communications, with no prior approval required. But the timing on Fidelity’s Twitter replies suggests to us that a Fidelity RP is approving every tweet. A good idea.
OK, so FINRA-regulated firms can do a lot with social media (many already are). How are they going to satisfy FINRA’s review and recordkeeping requirements? Automation isn’t necessary, but without it social media will be a headache and not as effective as it could be for most firms.
Of the software available today, one application excels at analytics and another at creating an auditable trail. None offers the robust review that, in our experience, most enterprises will need. But more on that in a future post.
Meantime, this guide is helping us think about how we implement social media strategies for our clients. We hope it helps you, too.