We generally support FINRA's effort to modernize Rule 2210 and recognize the challenges that social media platforms, digital communications, and generative artificial intelligence have created for member firms particularly as it relates to the ability for reps or third parties to create a large volume of content in relation to staffing levels in ad compliance. A more risk-based supervisory approach may provide firms with additional flexibility while allowing supervisory resources to be focused on higher-risk communications.
However, we respectfully request additional guidance regarding how firms may reasonably implement and document risk-based supervision in practice.
Specifically, the proposal appears to contemplate that some categories of retail communications may no longer require principal pre-use approval and instead may be supervised through post-use reviews, surveillance programs, training, and related controls. While we support that concept, additional clarity would help firms design supervisory systems that are both effective and reasonably consistent across the industry.
Examples of areas where guidance would be particularly helpful include:
• Social media content posted by registered representatives and investment adviser representatives.
• Podcasts, webinars, videos, and other long-form digital content.
• Educational content discussing retirement planning, insurance concepts, investment concepts, or market developments that may not contain an explicit recommendation.
• Communications created or assisted by generative AI tools.
• Communications developed from approved templates or content libraries.
One practical challenge involves the distinction between content retention and content review. A firm may retain all communications and conduct risk-based sampling or post-use surveillance, but the proposal does not explain how FINRA would evaluate the adequacy of such a program. For example, if an associated person produces a large volume of podcast episodes, videos, or AI-generated content, must a firm review every communication to appropriately categorize its risk, or may the firm rely upon a documented sampling methodology? If sampling is permitted, what factors would FINRA consider in evaluating whether the firm's review program is reasonably designed?
We encourage FINRA to supplement any final rule amendments with FAQs, examination scenarios, and practical examples illustrating acceptable supervisory approaches. Such guidance would improve consistency among firms and provide greater confidence that risk-based supervisory systems are being implemented as FINRA intends.
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Matt Collins Comment On Regulatory Notice 26-14
FINRA Regulatory Notice 26-14 – Comment Regarding Risk-Based Supervision of Retail Communications
We generally support FINRA's effort to modernize Rule 2210 and recognize the challenges that social media platforms, digital communications, and generative artificial intelligence have created for member firms particularly as it relates to the ability for reps or third parties to create a large volume of content in relation to staffing levels in ad compliance. A more risk-based supervisory approach may provide firms with additional flexibility while allowing supervisory resources to be focused on higher-risk communications.
However, we respectfully request additional guidance regarding how firms may reasonably implement and document risk-based supervision in practice.
Specifically, the proposal appears to contemplate that some categories of retail communications may no longer require principal pre-use approval and instead may be supervised through post-use reviews, surveillance programs, training, and related controls. While we support that concept, additional clarity would help firms design supervisory systems that are both effective and reasonably consistent across the industry.
Examples of areas where guidance would be particularly helpful include:
• Social media content posted by registered representatives and investment adviser representatives.
• Podcasts, webinars, videos, and other long-form digital content.
• Educational content discussing retirement planning, insurance concepts, investment concepts, or market developments that may not contain an explicit recommendation.
• Communications created or assisted by generative AI tools.
• Communications developed from approved templates or content libraries.
One practical challenge involves the distinction between content retention and content review. A firm may retain all communications and conduct risk-based sampling or post-use surveillance, but the proposal does not explain how FINRA would evaluate the adequacy of such a program. For example, if an associated person produces a large volume of podcast episodes, videos, or AI-generated content, must a firm review every communication to appropriately categorize its risk, or may the firm rely upon a documented sampling methodology? If sampling is permitted, what factors would FINRA consider in evaluating whether the firm's review program is reasonably designed?
We encourage FINRA to supplement any final rule amendments with FAQs, examination scenarios, and practical examples illustrating acceptable supervisory approaches. Such guidance would improve consistency among firms and provide greater confidence that risk-based supervisory systems are being implemented as FINRA intends.