FINRA Provides Guidance on Social Networking; Requires Recordkeeping
FINRA has issued guidance on the use of blogs and social networking sites that relate to the business of the broker-dealer. FINRA notes that the guidance does not apply to use of social networking for “purely personal reasons.” Most significantly, NtM 10-06 requires that a firm retain all records of social media communications that would otherwise be required under the securities laws. FINRA suggests employing some technology system to collect communications records. Recommendations made would be subject to the usual suitability requirements, and static postings would constitute “advertisements” under Rule 2210. Firms must also supervise communications in a manner similar to a method used to monitor e-mail communications i.e. using sampling or lexicon-based search methodologies. Firms should also have a system for screening third party communications.
OUR TAKE: Generally, FINRA is telling firms to treat social networking communications similar to any other advertising piece or customer communication. The tricky part for firms will be to monitor the sites and capture the data, which is not hosted on a proprietary server. It is helpful, too, that FINRA does not mandate an outright ban on using social networking sites. In fact, the Notice specifically excludes personal communications.