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FINRA compliance rules extended to social media platforms

As Burton Group’s Mike Gotta blogged yesterday, the Financial Industry Regulatory Authority (FINRA) has issued new specific guidance to securities firms and brokers on the use of social media.

The regulatory authority’s updated guidance addresses the changes in usage, as workers spend more time on social networking sites in a business context.

As cited by the guidance, a recent report by the Pew Internet & American Life Project stated that 46% of American adults who use the Internet logged onto a social networking site in 2009. Now FINRA has addressed how rules governing communications apply to social media platforms that have been created by a firm or its registered representatives. For insight into one firm’s approach, check out “ href=” invests in social media archiving for FINRA compliance last year.

“Social networking sites and blogs raise new regulatory challenges, particularly in the areas of supervision, advertising and books and records requirements,” said FINRA Chairman and CEO Rick Ketchum in a press release. “Our goal in issuing this notice is to ensure that firms and brokers use social networking sites in an appropriate manner.”

One of the recommendations in the new guidance for FINRA compliance is that covered firms create, distribute and adhere to an online privacy and social media policy. Another key requirement is that records of communications related to the broker or dealer’s business made through social media sites must be archived.

These new FINRA compliance rules, however, are technology-neutral in terms of how such archiving must be achieved. FINRA indicates that it is aware of different methods for social media archiving under development, including systems that interface with a firm’s network or the use of external systems by a registered representative working off-site.

FINRA guidance for social media now includes a best practice that “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 the content.”

The full updated guidance on social media for FINRA compliance is linked below:

Finra Guidance Social Media by Alex Howard

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