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 Sites Guidance on Blogs and Social Networking Web Sites. The guidance was released last week and elaborated on in today’s Webinar, which attracted 700 registrants.

Firms are free to develop and define what adoption and entanglement means to them, said Vice President and Director, Advertising Regulation, Thomas A. Pappas, leaving a glimmer of hope that a firm could define adoption less narrowly. Using Facebook’s Like feature is also adoption, confirmed Amy C. Sochard, Director, Programs & Investigations, Advertising Regulation, with no apparent hesitation.

Training, supervision and personal use were focuses of the Webinar, which was a mix of presentation and question-answering. Chad Bockius from SocialWare (@bockius) provided a running account of the Webinar using #FINRASN and we recommend it to you.

Strong interest in social media appears to be driving several FINRA deliverables. A replay of today’s Webinar will be available in a few weeks, and Pappas said a podcast and training offering is in the works. An additional Webinar “Implementing Compliance Procedures for Social Media” has been scheduled for March 17.

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 insist on record-keeping and supervision. And specific investment product recommendations are obviously trouble–in fact, FINRA says a prohibition would be a best practice unless the content posted was previously approved by a registered principal.

But we think that the door to the marketing potential of Twitter, LinkedIn and Facebook for financial advisors and firms swings open with FINRA’s distinction between “static content” requiring the prior approval of a registered principal and “non-static content,” which does not require prior approval.

FINRA acknowledges that Twitter and Facebook provide for non-static, real-time communications, such
as interactive posts. “The portion of a social networking site that provides for these interactive communications constitutes an interactive electronic forum, and firms are not required to have a registered principal approve these communications prior to use,” FINRA says.

This could have been the deal-breaker. What FINRA describes as static content on social networking sites–profile, background or wall information–must be approved by a registered principal prior to posting. It’s more work for a Compliance review group but it’s manageable. If, on the other hand, all tweets by everybody needed to be approved prior to posting, social networking would be dead on arrival for FINRA-regulated entities in the investment industry.

Please read FINRA’s press release and the regulatory notice for all of the details.

There will be much more to come on this, including at the February 3 FINRA Webinar. (FINRA announced its rescheduling from March 17 via email this afternoon.)

From our perspective, the topic of social media participation has moved from “FINRA won’t let us” to “How long will it take for Compliance to prepare our policies and procedures?”

This announcement is great timing for tomorrow’s Investment News Webinar on Advisors and LinkedIn. See you there?

And, of course, we’re interested in what you think of the FINRA guidance–as always, we welcome your comments below.

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.