Broker-dealers don’t have to track every message sent through social media -- only ones that relate to business purposes. And unscripted interactions? They can be reported after they occur.
That's the latest message from the Financial Industry Regulatory Authority on the use of Facebook, LinkedIn and other social media.
In a long awaited guidance published on its website, the watchdog for the brokerage industry offered fresh guidance about the approvals they need before communicating with potential or existing customers on social media sites or via Twitter. The guidance expands on a regulatory notice issued by FINRA in January 2010.
The key message: brokerages have supervisory and recordkeeping obligations based on the content of the communications – whether it is business related – and not the media.
Broker-dealers must track and supervise messages that deal with business, most specificallly. However, companies also must have systems in place to supervise and retain interactions with customers, if they are made through personal mobile devices.
A broker who mentions his or her employer on a site such as LinkedIn must also get-approval from the firm.
Broker-dealers don’t need preapprovals for socalled “unscripted interactions’ or instant messages but must alert their supervisors after the fact.
The Securities and Exchange Commission has not issued a set of guidelines about social networking leaving the Investment Advisers Act of 1940, which governs advertising, to speak for it. FINRA published a regulatory notice offering guidance on the use of social media in 2010bout laory on
Here are three key questions and answers offered by FINRA in its recent communiqué to member firms.
What if the employee is on his or her own machine?
Does determining whether a communication is subject to the recordkeeping requirements of Securities and Exchange Commission Rule 17a-4(b)(4) depend on whether an associated person uses a personal device or technology to make the communication?
Answer: SEA Rule 17a-4(b)4 requires a firm to retain records of communications that relate to its “business as such.” Whether a particular communication is related to the business of the firm depends upon the facts and circumstances. This analysis does not depend on the type of device or technology used to transmit the communication, not does it depend upon whether it is a firm-used or personal device of the individual; rather, the content of the communication is determinative.
Must business messages be pre-approved?
Must material changes to static content posted by a firm or its associated persons on a social media site that contains business communications receive prior approval by a registered principal?
Answer: NASD Rule 2210(1)(b) require a registered principal to approve each advertisement and item of sales literature before the earlier of its use or filing with FINRA’s Advertising Regulation Department. Firms are expected to adopt procedures requiring prior registered principal approval of any advertisement or sales literature that has been materually changed, even if it had been previously approved in an earlier version.
Can employees use personal devices to deal with company business?
May associated persons use personal communication devices and other equipment, such as smart phone or tablet computer, to access firm business?
Answer: Yes. Firms may permit their associated persons to use any personal communication device, whether it is owned by the associated person or the firm, for business communications. In order to ensure that the business communications are readily retrievable without necessitating the capture of personal communications made on the same device, firms should have the ability to separate business and personal communications. This may mean requiring that the associated person use a separately identifiable application on the device for their business communications.
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