Look what I came across this morning while doing my daily social site crawl.

The title–”FINRA’s 10 Commandments of Social Media Engagement for Financial Firms”–is what caught my attention. If there’s been one single comment I’ve heard about FINRA and social media, it’s that the “guidance” in last year’s FINRA Regulatory Notice 10-06 has left too much to interpretation. Commandments? That’s not been my sense of FINRA comments so far. (And remember that the industry is on high alert for some additional direction in a matter of weeks.)

Nonetheless, you may benefit from taking a look at this 43-slide presentation published yesterday by Glen Gilmore. According to his LinkedIn profile, Gilmore is principal of Gilmore Business Network, a NJ-based social media consulting firm, and a practicing attorney. He’s an adjunct professor of Digital Marketing & Social Media Law at Rutgers University. His presentation provides substantial detail on some of the issues facing FINRA-regulated entities.

As I pass this on, I’ll echo Gilmore’s disclaimer on page 3 of the deck–none of the content should be taken as gospel (as it were). Gilmore’s background is impressive and includes serving as a media source during the country’s anthrax crisis and mayorship of New Jersey’s eighth-largest city. But, no financial services experience is shown.

It’s been a good week for tea-leaf readers attempting to piece together the future of social media regulation for FINRA-related entities.

At this writing, at least two articles have appeared with some interesting detail on what was said Tuesday at the Insured Retirement Institute’s (IRI) regulatory conference in Washington. Check out:

• FINRA Prepares New Social Media Guidance for BDs is AdvisorOne’s coverage of “Social Media–The Latest Word,” a session with Joseph Price, senior VP for advertising regulation/corporate financing at FINRA, and Mitchell Bompey, executive director, legal and compliance at Morgan Stanley Smith Barney.

According to the article, Price said the additional guidance being prepared (to build on FINRA Regulatory Notice 10-06) would not upend social media systems that have been developed. The guidance is being reviewed by senior staff at FINRA and will be sent to the SEC in the “next week or two.”

(As an aside, I take issue with the reporter’s characterization of Morgan Stanley as having “pioneered the concept of allowing its advisors to use social media.” Cambridge Investment Research staked that claim exactly one year ago and others’ pilots went public before Morgan Stanley. When the history is written about how social media enabled advisors to became more authentic and relevant to their clients, we’re going to want to have the facts straight.)

• Finra’s Ketchum: Questions still surrounding social media, which is Investment News’ excerpt of the prepared statement made by Richard Ketchum, Finra’s chairman and chief executive.

But we’re partial to tweets here on AdvisorTweets.com, and the tweets made by conference attendees onsite using #GLRC2011 were especially intriguing. I’ve selected a few of them below. Thanks to the BGK Group Twitter accounts and to @jbreitfelder, whose re-tweeting some of these today pointed out the value of the hashtag. I hadn’t followed it in real-time.

Over the last several months, we’ve seen surveys and reports on the use of social media by financial advisors, by asset managers and by investors. Compliance officers are now weighing in via a report today from Smarsh.

Smarsh released the 2011 Electronic Communications Compliance Survey at FINRA’s 2011 Annual Conference underway in Washington, D.C. The findings are based on 223 individuals with compliance-related responsibilities at broker-dealers (53% of respondents), registered investment advisory (RIAs) firms (20%) and other regulated firms.

You can submit your contact information and download a free copy of the report but here’s the overall conclusion: “Respondents demonstrated an accurate understanding of their compliance obligations related to electronic communications; however, a gap existed between what they need to do to comply with these regulatory requirements and what they are actually doing.”

Social media is a compliance challenge for an array of reasons that are likely familiar to readers of this blog (e.g., the nature and volume of the content updates, the interaction that occurs, the requirement to archive communications, etc.).

Mobile represents a challenge to the extent that messages are sent using smartphones and tablets versus company-issued (and locked-down) computers. One interesting finding is that these firms, most of which I’d assume to be Microsoft enterprises, express less confidence in their command of Windows mobile devices than they do of Google Android and Apple’s mobile operating system (iPhone and iPad) devices.

But the high-level finding is that more than four out of 10 compliance officers say they have zero or minimal confidence in their ability to produce social media or mobile message data if they were specifically requested in an audit or e-discovery event, as this graph from the Smarsh report shows.

Smarsh, of course, is a provider of solutions and these survey findings no doubt help their marketing objectives. I cite the survey here for the insights provided for those of us interested in the pace of regulated investment firms’ adoption of social media.

This documented widespread vulnerability and discomfort on the part of the compliance function suggests more slow-going and outright opposition, at least until more systems and processes are in place.

Having unplugged for the last few days, I jumped back on the job yesterday to find quite a few fascinating news reports and commentaries about the regulation and examination of both SEC- and FINRA-regulated financial advisors “using” social media. “Using” is in quotes because at least one regulator is said to be interested in even advisors’ access of–as opposed to participation in–social sites.

A Sweeping Sweep

First up is the InvestmentNews report from Monday afternoon that the SEC had begun a “sweep” of registered investment advisers’ (RIAs) use of social media. The report, which the SEC has declined to comment on, was based on a January 24 advisory published on the ACA Compliance Group website.

Be sure to read the detail that ACA provides. For example, “Documentation is requested in order to identify an adviser’s level of involvement with or usage of social media websites. The requests have been seen to focus on social media websites such as Facebook, Twitter (and AdvisorTweets.com), LinkedIn, LinkedFA, YouTube, Flickr, MySpace, Digg, Redditt, as well as any blogs used by, or subscribed to, by the adviser.”

Wow. To include a review of even blog subscriptions…that is pretty sweeping.

ACA says it believes this sweep “will enable the SEC to evaluate how prevalent this activity is to registered investment advisers and whether it needs to dedicate further rulemaking and/or examination resources to complete a more regular and thorough evaluation.”

To date, RIAs have been thought to enjoy more flexibility in social media than FINRA-regulated firms. This explains why investment advisors are disproportionately represented on AdvisorTweets, for example.

For commentary on the SEC review, see SEC Wants To Follow You on Twitter, Facebook, LinkedIn, YouTube… published on a Forbes blog yesterday afternoon. You might also be interested in the commentary accompanying the close to 100 tweets (as of the time this post was published Wednesday morning) to the article.

It’s broader in scope, but Repairing the Breach with Social Media is a post published yesterday by Scott Peterson, a former communications executive at NYSE-Euronext, Nasdaq Stock and the North American Securities Administrators Association. Peterson argues that social media enablement may be necessary to rebuild the public’s trust in advisors. I liked this line in his post: “Bernie Madoff would have hated social media, since he never wanted to tell anyone anything about himself or what he was doing.”

Social Media A FINRA Exam Priority—And Subject of March 10 Task Force Meeting

Social media is now on FINRA’s annual list of exam priorities, according to a letter the agency released last week. “Firms can expect FINRA examiners to review supervisory systems and recordkeeping for electronic communications,” the letter said. The notice seems like a predictable next step following FINRA’s release last January of its social media guidance 10-06.

But here’s the intriguing news. Based on reports from a February 8 SEC CCOutreach Broker-Dealer National Seminar, there’s evidently more to come from FINRA on social media.

FINRA “is planning a sequel to its social media guidance as well as updates to a pair of decade-old opinions about information that firms post to their own websites,” according to a Compliance Reporter report on the Nasdaq community site. Input for the sequel is expected to come in part from an industry task force scheduled to meet March 10, the site learned from Joseph Price, FINRA senior vice president of FINRA corporate financing and advertising regulation.

At the seminar, Price reportedly acknowledged that “some in the industry felt the guidance did not go far enough to untangle thorny questions that prevent firms from letting representatives post anything more than business card information online.”

The Financial Advisor magazine website also provided coverage of what was said at the seminar, including some industry pushback on the effect of FINRA’s current position.

“Tweeting Rules May Leave Brokers With Little to Say to Clients” and “Twitter, Facebook rules leave reps with little to say” were the headlines of articles published today on Bloomberg.com and InvestmentNews.com and getting considerable attention on Twitter (200 tweets to the Bloomberg article by 10CT).

From our consulting work, we know how firms wrestle with balancing the allure of social media and the rules and penalties associated with stepping over Compliance lines.

That notwithstanding, the advisors we follow on AdvisorTweets.com show by example that financial communication can be enhanced by measured social media participation. And, their tweets offer a view of what else they’re doing, with their blogs, on Facebook, LinkedIn and YouTube etc.

Here’s the comment we posted at the bottom of the InvestmentNews article:

It’s always interesting to read an update on the pace of social media adoption in the industry. Broker-dealers and asset managers have significant challenges when exploring this interactive, real-time means of communicating.

But we wouldn’t want readers of this article to think that all financial advisors are mum or that prospects for participation are dim because of FINRA’s regulatory guidance. On AdvisorTweets.com we follow more than 470 advisors using Twitter for business purposes. They’re largely independent advisors, but the total includes several FINRA-regulated advisors who are tweeting with the blessing of LPL, Cambridge Investment Research and other broker-dealers. And, social media enablement was a theme of the Charles Schwab conference in October, front-runned by the launching of Schwab’s Twitter account @Schwab4RIAs.

We invite your readers to check out the advisors’ tweets to see how these early adopting advisors are using Twitter to add value while staying well within the rules.

We’ve been watching something develop since yesterday. It’s fascinating in terms of what it demonstrates about social media, the “conversations” social media prompts and the apparently evocative topic of financial advisors and social networking.

Yesterday morning we came across a New Comm Biz blog post headlined “Company Forces Employee To Delete LinkedIn Profile.” It was about an email that blogger Tac Anderson said he received from a friend who cited FINRA’s social media guidance as the reason he was being forced to take down his LinkedIn profile. The friend is not identified as a financial advisor. Anderson, a Digital Consulting Director for the public relations firm Waggener Edstrom, asked another friend for comment and then concluded the post by asking if others were similarly affected.

As of this writing, close to 600 tweets have been distributed about this blog post, helped in large part by a tweet from social media celebrity @Chris Brogan and @BethHarte, MarketingProfs’ community manager. We sent out a tweet, too, although we had misgivings. We understand why Anderson declined to name the firm or his friend. Still, there’s still a little bit of journalist left in us to keep us from getting too worked up about an unattributed story.

Adding to our vague discomfort, although it is probably neither here nor there, was the copy above the link. As opposed to including the blog post headline, it was a promotion for Viagra.

Throughout yesterday, many people–including our followers familiar with FINRA and the issues as well as lots of others–hopped on this unsubstantiated story. Go to this bit.ly page to see how one tweet spread, including internationally. In their broadening of the story and FINRA’s reach, some of the tweets began to take on all the characteristics of the old-fashioned telephone game.

• @susioneill Financial sector tackle social media by trying to delete it-employees must delete Linked-in profiles http://bit.ly/cAzea6 (via@jamiehudson)
• @complianceweek Because of FINRA compliance!!! RT @ConversationAge: Company Forces Employee to Delete LinkedIn Profile http://ow.ly/15JML
• @kyleproctor For all you bankers/finance using SM, good read RT @ConversationAge: Company Forces Employee to Delete LinkedIn Profile http://ow.ly/15JML

We marvel at the reaction that the post has evoked. But we call your attention, too, to the comments, which are a great illustration of how social media mixes it all up. The discussion of registered representatives’ use of social networking sites is not a topic that will be confined to the industry itself or to industry insiders. At another time and off-line, well regarded compliance experts Mark Astarita and Doug Cornelius might not be compelled to get involved in this kind of conversation. Both of them have blogged about FINRA guidance on their own sites. But note how they seek to provide some context in the comments to the post.

By the way, the story is contrary to what we’ve heard from a few firms (nope, we’re not naming them either) since last week’s FINRA Webinar. The few that we’ve spoken to say, as a result of the FINRA guidance issued, that they’re starting to focus on the social networking sites, with LinkedIn as the first frontier.