FINRA recently provided social media guidance to broker/dealers.  The Regulatory Notice  guides firms on applying communication rules to social media sites which FINRA defines to include blogs and social networking sites like Facebook.  It does not apply to sites used for purely personal reasons but the line between the two blurs as the growth of social media continues.

What are the highlights?  Here are a few:

  • If a firm or its personnel are using social media to communicate about business it is required to keep records of all such communications.
  • Don’t recommend a security on a social media site or it will trigger the requirements of NASD Rule 2310 regarding suitability.  
  • If a firm is going to recommend a security such recommendation must be approved approved by a registered principal of the firm.
  • Webinars and other interactive electronic forums like a chat room are considered a public appearance under NASD Rule 2210.
  • Static information on social media, such as a profile, background, or wall information must be approved by a registered representative before it is posted.
  • FINRA considers a static blog an advertisement that requires approval of a principal but a blog that permits real-time interactive communications does not require prior principal approval.
  • Interactive communications on a social media site that are real time do not require a registered principal’s approval.  
  • Even though a principal’s prior approval may not be necessary, the firm must supervise these electronic communications in a manner reasonably designed to ensure they do not violate the content requirements of FINRA’s communication rules.

The notice goes on to provide more detail on supervision of social media sites and third-party posts.  Needless to say it’s unlikely that a broker/dealer will recommend a security over Twitter or Facebook – that’s just not smart at a number of levels.  Any real time communications regarding securities will require supervision by the firm and archiving of those communications.    I’m not sure the notice will "chill" social media use by broker/dealers but I’m also not sure it will drive them to use it as a business device other than general networking.