The Investment Industry Regulatory Organization of Canada (IIROC) recently released Regulatory Notice-0349. Notice-0349 is effective immediately and replaces Notice MR0281. It’s meant to provide guidelines for the review, supervision and retention of advertisements, sales literature and correspondence. Available methods of communication have changed tremendously with the uprising use of social media such as LinkedIn, Facebook, Twitter and blog sites. IIROC mirrors FINRA Notice 10-06 and Notice 11-39. Our social media solution fully supports IIROC compliance concerns.
Below are some key clarifications. These are Erado’s opinions and are NOT to be considered legal advice. They are not endorsed by IIROC or any other regulatory body.
Record-keeping Responsibilities
“Firms must retain records of their business activities, financial affairs, client transactions and communication. Whether a communication is related to the business of the Dealer Member, and therefore captured by this requirement, depends on the content of the communication. The type of device used to transmit the communication or whether it is a firm-issued or personal device is irrelevant. Dealer Members must therefore design systems and programs with compliant record retention and retrieval functionalities for those methods of communication permitted at the firm. For instance, the content posted on social media websites, such as Twitter, Facebook, blogs, chat rooms and all material transmitted through emails, are subject to the above-noted legislative and regulatory requirements.”
Erado’s interpretation
Firms that allow Dealer Members social media privileges, must archive all electronic communication content from these sites (i.e. wall posts, messages, links, images, tweets, status updates, etc.) It is irrelevant what type of personal device they use. An individual’s social media use will be prohibited if there is no solution embedded to capture this content.
Suitability and Recommendations
“Dealer Members must be mindful of the additional regulatory obligations that may be triggered as a result of the content of a communication delivered to clients. For instance, a “recommendation”, whether delivered via a social media website or by way of written correspondence, must take into consideration the suitability requirements set out in IIROC Dealer Member Rule 1300.1 […] At the very least, Dealer Members should implement measures to monitor and/or prohibit electronic communications that constitute a recommendation which must comply with IIROC’s suitability rules.”
Erado’s interpretation
Dealer Members should be aware that using interactive social networking sites may generate other regulatory obligations. For example, a “like” on Facebook, “retweet” on Twitter or by way of an email can be interpreted as a “recommendation,” and must take into consideration of the requirements set out in IIROC Dealer Member Rule 1300.1. The compliance department is responsible for protecting the firm, their advisors, and the public.
Supervisory Responsibilities
“Pursuant to IIROC Dealer Member Rule 29.7(2), Dealer Members must establish policies and procedures that allow them to comply with their supervisory obligations and protect clients from misleading or false statements. Subject to IIROC Dealer Member Rule 29.7(3), it is at the discretion of Dealer Members to determine whether to employ pre-use approval, post-use review, or post-use sampling.”
Erado’s interpretation
Dealer Members must define a corporate compliance policy, deploy an easy to manage compliance solution like Erado’s, and defend your policy.
Third-Party Communications And Research
“Dealer Members should exercise extreme caution when engaging in third-party communications, such as permitting third parties to comment or post on a Dealer Member’s website or providing links on a Dealer Member’s website to a third party website. Third-party posts may be attributed to or considered an endorsement by the Dealer Member, thereby triggering regulatory and legislative requirements. For example, re-tweeting a client’s post or providing a “thumbs-up” may be considered an endorsement. Whether or not a third-party communication will be considered to be the Dealer Member’s communication will depend on the facts and circumstances of each case. Dealer Members should consider the use of disclaimers, the nature of their involvement in the preparation of the communication prior to posting and any evidence of explicit or implicit endorsement or approval of the post to help determine whether or not the third-party post reflects the views of the firm. Dealer Members should note that the use of disclaimers will not necessarily relieve Dealer Members’ of their responsibility for third-party posts.”
Erado’s interpretation
Dealer Members need to reconsider allowing “comments” on their sites. Third-party posts may be considered endorsements, inducing regulatory and legislative requirements. “Re-tweeting,” or “liking” a client’s post may be considered an endorsement. Again, what’s considered to be an endorsement from third-party sites is in the gray zone. IIROC provides suggested best practices relating to third-party communications in their notice.
