Learn About FINRA and Social Media Compliance Rules

In January 2010, the Financial Industry Regulatory Authority (FINRA) provided financial industry professionals with guidelines to govern their social media interactions with the general public.

Providing its registered members with guidelines about how to communicate financial information online is nothing new for FINRA; as early as 1999, the regulatory body began dictating how members should communicate within Internet chat rooms.

In FINRA’s eyes, its new social media guidelines are an extension of their previous Internet communication advice.

Why should individual finance professionals and finance firms follow FINRA’s guidance?

Here are five important reasons.

1. FINRA’s guidelines prevent you from breaking SEC rules (see “Social Media Spotcheck” here)

Very old SEC rules, such as the Securities Exchange Act of 1934 (SEA), apply to modern ways finance professionals interact with the general public within social media. According to SEA, broker-dealers must maintain certain records for at least three years. These records now apply to social media posts as well.

2. Third parties aren’t always as reliable as you are

Under NASD Rule 2210, even a link to a third-party website that contains misleading information can get you into trouble. Firms become responsible for content on other websites whenever the firm:

  • Co-brands with the site
  • Adopts the content or entangles itself with the content of that site
  • Either explicitly or even implicitly, the firm endorses the site’s postings

Given the above, be careful when using information, citing or linking to a third-party website.

3. Recommendations via social media trigger NASD Rule 2310

Whenever firms “recommend” a security on a social media site, NASD Rule 2310 concerning suitability takes effect. “Recommend” here is in quotation marks because a communication that the firm doesn’t consider a recommendation may nevertheless be considered a recommendation in FINRA’s eyes. To clarify what constitutes a recommendation, firms should refer to FINRA’s Online Suitability notice, or NTM 01-23.

4. Posts might actually be “advertisements”

Just as the word “recommend” was in quotes above, “advertisements” here is also in quotes for the same reason. Under FINRA’s rules, certain static content may be considered advertising and thus will be subject to advertising guidelines.

5. The above applies to internal social media and communications, too

When firms use applications such as SalesForce Chatter, these internal communications also trigger FINRA’s social media guidelines.

Summary

When it comes to interacting with clients and potential clients via social media, firms will be wise to play it safe. Whoever is engaging in social media at the firm should read the FINRA guidelines carefully and follow them even more carefully. Following these rules will keep your firm above-board with both FINRA and the SEC.

So, understanding the rules and guidelines for social media in the financial services business are important. But, recognizing that there are other, additional channels and mechanisms to build trust and authority is key.

Jon Rognerud is known as the most sought-after SEO, Digital Marketing Consultant and Online Advisor for Finance, Technology, Real-Estate and Health industries. He is famous for building business strategies, mobile websites and integrated marketing solutions that brings process, profits and brand loyalty…without wasting time. Jon Rognerud is the author of the best-selling book (Buy On Amazon), “The Ultimate Guide To Optimizing Your Website” (Entrepreneur Press) and is the Founder of Chaosmap. Get more information about the company here.
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