FINRA Issues Guidance to Firms, Brokers on Communications with Public Through Social Networking Web Sites
Washington, DC — The Financial Industry Regulatory Authority (FINRA) today issued guidance to securities firms and brokers regarding the use of social networking Web sites such as Facebook, Twitter, LinkedIn and blogs to communicate with the public.
The guidance in Regulatory Notice 10-06, which is presented in Q&A format, 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 Notice also addresses the recordkeeping and other responsibilities of firms.
"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. "Our goal in issuing this Notice is to ensure that firms and brokers use social networking sites in an appropriate manner."
The Notice emphasizes that each firm must develop its own policies and procedures — in the context of its own particular business model and compliance and supervisory programs — 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 that are intended to enable firms to retain records of communications made through social networking sites. As the Notice states, however, "FINRA does not endorse any particular technology to keep such records, nor are we certain that adequate technology currently exists."
Regulatory Notice 10-06 is a response to the expressed need for guidance explaining how FINRA rules governing communications with the public, recordkeeping and supervision apply to social networking sites. FINRA has previously issued guidance on the application of communications regulations to Internet communications in its Guide to the Internet for Registered Representatives, as well as in numerous podcasts.
In developing the Regulatory Notice, the FINRA staff was informed by its own experience in applying FNRA rules to electronic communications, by its conversations with experts in social networking technology, and by the work of a Social Networking Task Force composed of compliance and other representatives of 14 firms.
FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms.
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