FINRA recently released the Regulatory Notice 11-39. Notice 11-39 supplements Notice 10-06 in the first round of guidance issued by FINRA in January 2010. Notice that 11-39 is not meant to alter the principles of 10-06, but rather answer additional questions that firms have raised regarding the application of the rules to social media use during the past 21 months.
Below are some key clarifications to questions impacting Erado’s customers. These are Erado’s opinions and are NOT to be considered legal advice. They are not endorsed by FINRA or any other regulatory body.
“As part of [his or her] responsibility, a registered principal must review prior to use on any social media site that an associated person intends to employ for a business purpose. The registered principal may approve use of the site for a business purpose only if the registered principal has determined that the associated person can and will comply with all applicable FINRA rules, federal securities laws including record keeping requirements, and any additional obligations established by the firm.”
Erado’s interpretation
What does “review prior to use on any social media site” mean? Our interpretation is that social media sites such as Facebook, LinkedIn, Twitter, Blogs, etc. need to be reviewed, and approved for advisor use. Therefore, if a policy isn’t already in place, then one should be created defining what social media sites are approved for advisor use.
“The registered principal must review an associated person’s proposed social media site in the form in which it will be ‘launched.’ Some firms require a registered principal to review the first posting by an associated person on an interactive forum within the site. This approach can help to ensure that the registered principal will be reviewing not only the initial communication, but the social media site itself in its completed design.”
Erado’s interpretation
What is “the form in which it will be ‘launched’” mean? Our interpretation is that a principal must review a draft of the static content such as a profile or blog post prior to posting. This follows current advertising review polices, and therefore has no measurable effect on the firms social media use or policy.
“FINRA considers unscripted participation in an interactive electronic forum to come within the definition of “public appearance” under NASD Rule 2210. Public appearances do not require prior approval by a registered principal.”
Erado’s interpretation
Comments on another’s post will be considered a “public appearance,” and need not be pre-approved by a firm principal. Post review of this content is allowed.
“Interactive content can become static. For example, interactive content could be copied or forwarded and posted in a static forum, such as a blog or static area of a web page, in a manner that renders it static content. It then would constitute as an advertisement under NASD Rule 2210, requiring prior approval by a registered principal of the firm. A static posting is deemed an “advertisement” under NASD Rule 2210, and therefore requires a registered principal to approve the posting prior to use.”
Erado’s interpretation
If you re-post or redistribute an interactive post or tweet to a static forum, such as an advisor’s blog or website, the content changes from interactive to static, and must be pre-approved. This follows current advertising policies. If a policy is not currently in effect to restrict or prohibit real time social media site feeds to an advisers blog, or website, it is not in place and a policy should be created.
“Some firms require each associated person to certify annually, or on a more frequent basis that the associated person is acting in a manner consistent with such policies.”
Erado’s interpretation
If you do not have a formal social media certification and training program, now is the time to create one.
“If a third party posts a business-related communication, such as a question about a security on an associated person’s personal social media site, […] the associated person [may] respond to the communication […] provided that the response does not violate the firm’s policies concerning participation on a personal social media site. If a firm has a policy stating that an associated person may not use a personal social media site for business purposes, then a substantive response by the associated person would violate this policy. Some firms permit a non-substantive response, and pre-approved statements that their associated persons may make to respond to such posts and that direct the third party to other firm-approved communication media, such as the firm’s email system.”
Erado’s interpretation
If the firm’s polices allow use of a personal account for business purposes, then you can answer inquiries related to the firm’s products, and services without violating FINRA rules. All of the content of the personal site must be captured, and reviewed based on the firm’s policy.
“Under NASD Rule 2210, a firm that co-brands any part of a third-party site, such as placing the firm’s logo prominently on the site, it is responsible for the content of the entire site.”
Erado’s interpretation
If policy allows your firm’s logo to be placed on the site you are “adopting” or “becoming entangled with,” the firm can be held responsible for any non-compliant content as if it distributed that content itself, both the site and the content on the site.
“In order to ensure that the business communications are readily retrievable without necessitating the capture of personal communications made on the same device, firms should have the ability to separate business and personal communications, such as by requiring that the associated persons use a separately identifiable application on the device for their business communications. If possible, this application should provide a secure portal into the firm’s own communication system, particularly if confidential customer information may be shared. If the firm has the ability to separate business and personal communications, and has adequate electronic communications policies and procedures regarding usage, then the firm is not required to supervise the personal emails made on these devices. Of course, firms also are free to treat all communications made through the personal communication device as business communications.”
Erado’s interpretation
If you develop and implement policy to have separate personal accounts from business accounts, you are not required to monitor and archive personal accounts.
