Exclusive Online Only ContentFINRA Issues Social Networking Guidance
January 26, 2010
The Financial Industry Regulatory Authority (FINRA), the main self-regulator for broker-dealers, has issued guidance to members regarding the use of social networking Web sites such as Facebook, Twitter, LinkedIn and Facebook, in addition to blogs, to communicate with the public.
Monday’s guidance “clarifies the responsibilities of firms to supervise the use of social networking sites to ensure that recommendations are suitable and their customers are not misled,” FINRA said in a release. The guidance also addresses recordkeeping and other responsibilities of firms.
"Social networking sites and blogs raise new regulatory challenges, particularly in the areas of supervision, advertising and books and records requirements," said FINRA Chairman and CEO Rick Ketchum. "Our goal in issuing this notice is to ensure that firms and brokers use social networking sites in an appropriate manner."
FINRA says that each firm must develop its own policies and procedures, “designed to ensure that the firm and its personnel are complying with all applicable regulatory requirements when using social networking sites.”
Some technology providers are developing systems intended to enable firms to retain records of communications made through social networking sites. In its release, FINRA said it “does not endorse any particular technology to keep such records, nor are we certain that adequate technology currently exists."
The guidance is contained in Regulatory Notice 10-06. FINRA has previously issued guidance on the application of communications regulations to Internet communications in its Guide to the Internet for Registered Representatives, as well as in numerous podcasts.
In developing the Regulatory Notice, the FINRA staff was informed by its own experience in applying FNRA rules to electronic communications, by its conversations with experts in social networking technology, and by the work of a Social Networking Task Force composed of compliance and other representatives of 14 firms.
