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The Latest From FINRA On Social Networking
We’re going to wander off the AdvisorTweets reservation this morning to make sure that you’re aware of a few FINRA-related updates that could impact financial advisors’ use of social networks, including Facebook, LinkedIn and–we are inferring here–Twitter.
FINRA’s Rick Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority, yesterday devoted part of his speech to the Securities Industry and Financial Markets Association Annual Meeting (SIFMA) to the subject of social networking. Here’s the excerpt:
“… how can firms evolve the way they communicate with customers while still meeting regulatory requirements and without sacrificing the protection of the very audience they are trying to reach? We continue to witness the advent of technologies that will challenge your ability to ensure compliance with regulatory requirements. The social networking phenomenon is one such innovation. Social networking sites such as Facebook or LinkedIn provide new ways to connect, inform and interact with customers. They also raise new regulatory challenges. For example, as currently designed they may not allow you to archive and maintain the communications on your own books and records.
Many registered representatives, particularly younger ones, want to use social networking sites to communicate with friends and potential customers. As currently constructed, these sites would not permit you to easily supervise these communications. For that reason, most firms prohibit their employees from using these sites for their business. Nevertheless, interest in these sites will not go unabated. Overcoming many of these challenges will require technology solutions. In fact, we are aware of new technologies that may soon enable firms to archive employee communications in order to comply with supervision and recordkeeping requirements.
FINRA is trying to do its part. We have formed a Social Networking Task Force comprised of industry participants to explore how regulation can embrace technological advancements in ways that improve the flow of information between firms and their customers—without compromising investor protection.”
You’ll find the full text of the speech here.
Here’s Reuters’ coverage of the speech and the IR Web Report had its own take.
We’d add only two thoughts. One is regarding the line about particularly younger registered representatives wanting to use social networking sites. Ahem, have you taken a look at the photos streaming on AdvisorTweets? As the FINRA task force will no doubt discover, it’s not just the younger financial advisors whose curiosity is piqued by social networking. We’d worry about that characterization because younger advisors who tend to have smaller books unfortunately tend to have less influence in effecting change.
Second, while we don’t know if the solutions used by smaller offices can be scaled by the larger brokerages, we do know that the independent advisors who today are using Twitter are archiving and maintaining their records. See the FP Pad June post for more on this.
Finally, FINRA has scheduled a Compliance Considerations for Social Networking Sites Webinar on Dec. 16. Update: On Nov. 23, this Webinar was rescheduled to March 17, 2010. This event holds great interest for those wondering if we’re going to see FINRA-regulated financial advisors tweeting in the near future.
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Don’t Look For Re-tweets From FINRA-Regulated Advisors
February 3, 2010 - 2:08 pm
Tags: FINRA
Posted in Compliance | 3 comments
As it stands today, FINRA considers re-tweeting “adoption”–attributable to the firm and, consequently, probably prohibited. That was one of the few clear surprises in FINRA’s Webinar on Compliance Considerations for Social Networking Sites held today. Adoption and entanglement are two concepts “borrowed” from the SEC and applied to third-party posts in FINRA’s Social Media Web [...]
FINRA Issues Social Media Guidance: Tweets Do Not Require Prior Approval
January 25, 2010 - 1:30 pm
Tags: FINRA
Posted in Compliance | 5 comments
At about mid-day today, FINRA released its 10-page Guidance on Blogs and Social Networking Web Sites. (A tip of the hat to @BillWinterberg who was first among our tweeps to spot the regulatory notice.) Others might disagree or read something in between the lines, but to us the guidance seems reasonable. Of course, FINRA will [...]
October 28, 2009 - 11:26 pm
Pat;
Great coverage and comments. I share your concern regarding the FINRA assumption that this is a “younger registered representative” focus for the same reasons as you.
What follows is excerpted from emii.com and their view of FINRA’s move.
“The Financial Industry Regulatory Authority plans to issue as early as the end of the year guidance on firms’ use of social networking Web sites. The issue has been a thorny one for the industry, with many firms having barred staffers from using sites such as Twitter and Facebook because compliance typically has no means of capturing and supervising communications on the sites (CR, 8/18/08).
“FINRA has assembled a taskforce of roughly a dozen firms to study the issue, Thomas Pappas, v.p. and director of advertising regulation, told CR. In particular, the group is consulting with FINRA officials on real-life queries, such as how frequently firms have to monitor third-party postings on their own blogs, and how much liability they bear for manipulative or fraudulent postings from the public, Pappas said. Other topics, such as how to capture social networking communications, also are being discussed.
“Pappas declined to name the firms involved in the taskforce, but said they include brokerages with independent sales forces that want to use networking sites to advertise their services. The taskforce met for the first time last month, and FINRA officials are following up with members individually, he added.
Pappas said he did not expect the self-regulatory organization to release rules on the issue. “I think we can probably get where we need with a notice,” he said.”
First of all I find it ironic that someone who deems it unnecessary to disclose members of the task force should be heading a task force that is evaluating the appropriateness of social media. Everything that I’ve read on the subject suggests it is built on the ability to solicit open and honest feedback from its participants. Oh well, onto my point.
Social media is pervasive throughout our society with well documented statistical evidence on the age, financial status and social media application preference of its users. To your credit you did a terrific job of identifying the diminsihing traffic to mutual fund companies websites and the need for those firms to leverage other forms of communicating “with” (i.e. social media)shareholders and not “at” their shareholders.
Scarry to think Pappas believes we can get by with a “notice” versus “rules” on an issue as large as social media. Handled properly the correct solution would allow for the transparency that FINRA advocates and is so desperately needed to restore investor confidence in their advisor’s and the industry.
Thanks for stepping up with your post.
Bruce
[Reply]
October 29, 2009 - 6:55 am
Bruce, thanks for adding the additional information from the October 20 post on emii.com.
Just to clarify, the information on declining traffic to asset management Web sites appeared on our sister site RockTheBoatMarketing.com.
[Reply]