FINRA Issues Social Networking Guidance

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The Financial Industry Regulatory Authority (FINRA) released Regulatory Notice 10-06, which serves as a guidance to members regarding the use of social networking websites such as Facebook, Twitter, LinkedIn and Facebook, in addition to blogs, to communicate with the public.     

The goal is to urge firms to develop customized policies and procedures for blogging and social networking, and to ensure that investors are protected from false or misleading claims posted on any social networking sites.    Further, FINRA’s guidance clarifies the responsibilities of firms to supervise the use of social networking sites to ensure that recommendations are suitable and their customers are not misled.   The guidance also addresses recordkeeping and other responsibilities of firms.

Some of the recommendations provided by FINRA include:

  • Retain records of communications related to the business made through social media sites;
  • NASD Rule 2310 may be triggered if a firm recommends a security through a social media site, depending on the facts and circumstances surrounding the recommendation;
  • Firms should consider prohibiting all interactive electronic communications that recommend a specific investment product and any link to such a recommendation, unless a registered principal has previously approved it;
  • Firms may also want to maintain a database of previously approved communications;
  • Static blog postings are considered advertisements under NASD Rule 2210;
  • If the blog includes real-time interactive communications it is considered to be an electronic forum that does not require prior principal approval, but must be supervised;
  • Firms must supervise communications on social networking sites under NASD Rule 3010 in a manner that ensures compliance with FINRA’s communication rules; FINRA’s Regulatory Notice 07-59 provides further guidance on supervisory procedures;
  • Generally, FINRA does not treat posts by customers or other third parties as the firm’s communication with the public subject to NASD Rule 2210.  However, third-party posts are attributable to the firm if the firm has involved itself in preparing the content or the firm explicitly or implicitly endorses or approved the content.

FINRA says that each firm must develop its own policies and procedures, designed to ensure that the firm and its personnel are complying with all applicable regulatory requirements when using social networking sites.

Some technology providers are developing systems intended to enable firms to retain records of communications made through social networking sites.   In its release, FINRA said it “does not endorse any particular technology to keep such records, nor are we certain that adequate technology currently exists.”

Anna Timone (195 Posts)


  1. And who is regulating the regulators ? Sorry but this is getting out of control – Can we please go back to the real world …… You know what is wrong, don’t do it & if you do, when you get caught you will be heavily fined and or jailed. Simple

    A corporate policy for the use of Facebook, pleeeeeease enough already. Just block it and move on. Simple

    To me the above reads like any other legal BS – 50 million lawyers claiming plausible deniability.

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