FINRA Provides Reminders Concerning the Use of Social Networking Websites and Business Communications

May 22, 2017

On April 25, 2017, the Financial Industry Regulatory Authority (“FINRA”) issued Regulatory Notice 17-18. The Regulatory Notice reminds broker-dealers of their recordkeeping obligations pertaining to business communications made through social media. Any business communications sent or received via social media must adhere to the same recordkeeping requirements as all other communications with the public. Therefore, firms must preserve records of such communications for a period of not less than three years, the first two in an easily accessible place. Firms should also establish a means to capture all business communications sent or received electronically, including messages on social media. The Regulatory Notice reiterates FINRA’s requirement that firms educate employees about the difference between business and non-business communications.

FINRA reconfirms in the Regulatory Notice that unsolicited posts by customers or other third parties on social media sites generally do not constitute communications with the public and are not subject to Rule 2210 requirements. However, FINRA cautions firms that these communications may be subject to the rule if firms become “entangled” in posts to the firm’s or associated person’s website. For example, FINRA may consider a firm entangled if the firm helped prepare a post, endorsed a post, or paid for a post.

FINRA further indicated that two considerations should be examined to determine if the firm or its associates have “adopted the content” of the third party:

  1. Is the link “ongoing” where investors have access to the site whether there are favorable or unfavorable comments about the firm? (If it is considered ongoing, the firm generally has not adopted the message.)
  2. Does the firm have influence or control over the content? (If yes, then the link is considered adopted.)

FINRA also reminds members that they may not post hyperlinks to third-party sites when they know or suspect that those sites contain false or misleading content. Again, FINRA notes that if the member adopts or becomes entangled in the content of the third-party site, the member may be held responsible for that same content.

The “Questions and Answers” section of FINRA Regulatory Notice 17-18 offers further guidance.

For more information please contact your ACA consultant, or contact Dee Stafford at (561) 628-5288 or via email at dstafford@acacompliancegroup.com.