In January 2010 the Financial Industry Regulatory Authority released a regulatory notice with guidance on blogs and social networking websites.
Now Joseph Price, FINRA senior vice president of corporate financing and advertising regulation, told Dow Jones a second Social Networking Task Force will meet in March and more guidance will be issued by the end of the year.
With more Americans using the Internet and social networking sites growing in popularity, how to regulate has become the question on the industry’s mind. Along with more general regulation questions, confusion has grown over the recordkeeping responsibilities of firms. In September 2009, FINRA organized a Social Networking Task Force with FINRA staff and industry representatives to discuss how firms and their registered reps could use social media sites for their business and ensure investor protection.
The key takeaway from FINRA’s regulatory notice from last year is that each firm must develop its own policies and procedures to ensure compliance with all requirements.
Price said at a recent Securities and Exchange Commission event that new guidelines may address issues such as how responsible firms are for third-party content they post on their own website. There still seems to be confusion about supervision over content that is “static” versus “interactive.” For example, static content is any communication on a website that doesn’t change and are considered advertisements, while interactive content occurs in real-time when firms or reps message back and forth with a client.
Meanwhile, last month the SEC began requesting information from some investment advisors as part of a social media sweep exam. According to the ACA Compliance Group, these items include: documentation of involvement in social media, such as Facebook, Twitter, AdvisorTweets.com, LinkedIn, LinkedFa, YouTube, Flickr, MySpace, Digg, Redditt, as well as any blogs; documentation of communication made by, or received by, an advisor on any social media website, such as blog postings, messages, and tweets; advisor's policies and procedures relating to the use of social media websites; documentation of any third-party use of social media that is maintained by the advisor. This includes communications posted by third parties on behalf of the advisor, as well as policies and procedures relating to these communications; advisor's policies and procedures relating to the personal use of social media by employees; documentation of an advisor's internal training and education programs for employees' use of social media for both personal and business use; documentation regarding any disciplinary action taken against an employee based on their use of social media; and the advisor's record retention policies and procedures concerning its involvement with or usage of social media, including record retention policies of the advisor, the advisor's employees, and any third-party utilized by the advisor to manage its use of social media websites.
ACA reported that the SEC’s documentation request letter “follows very closely” with the seven guidelines that FINRA released as part of a webinar on social media and the 10-06 guidelines on Feb. 3, 2010.
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