FINRA Regulatory Notice 11-39: Social Media Websites and Use of Personal Devices for Business Communications

Following its January 2010, Regulatory Notice 10-06, providing guidance on communications with the public through social media sites, FINRA has issued Regulatory Notice 11-39 providing further clarification about application of FINRA rules to new technologies. The notice addressed a number of topics, including recordkeeping, supervision, third-party posts, third-party links and websites, and associated persons accessing social media sites from personal devices.

Recordkeeping

FINRA reminds members that their obligations to keep records of communications made through social media depend on whether the content of the communication constitutes a business communication. The SEC has stated that the content of an electronic communication determines whether it must be preserved.

Supervision

As part of its responsibility under NASD Rule 3010, a firm’s registered principal must, prior to use, review any social media site that an associated person intends to use for a business purpose. FINRA has noted that a registered principal must review an associated person’s proposed social media site in the form in which it will be “launched.” Under NASD Rule 2210, unscripted participation in an interactive electronic forum comes within the definition of “public appearance.”

To monitor these fora, FINRA recommends that firms adopt risk-based supervisory procedures utilizing post-use review, including sampling and lexicon-based search methodologies, of unscripted participation in an interactive electronic forum. FINRA requires that any procedure that a firm adopts be reasonably designed to ensure that interactive electronic communications do not violate FINRA or SEC rules. Static posting is deemed an “advertisement” under NASD Rule 2210 and therefore requires a registered principal to approve the posting prior to use.

Links to Third-Party Sites

FINRA warns members that a firm may not establish a link to any third-party site that it knows or has reason to know contains false or misleading content. FINRA concludes that a firm could be deemed to have become “entangled” with a third-party site if, for example, it participates in development of the content on the third-party site.

Data Feeds

The notice also addresses FINRA’s requirement that firms adopt procedures to manage data feeds into their own websites. FINRA is requiring that firms regularly review data feeds for red flags that indicate that the data may not be accurate, and take immediate steps to correct any inaccurate data.

Finally, in a “Q&A format, the notice provides additional guidance regarding, recordkeeping, supervision, third-party posts, third-party links and websites, and associated persons accessing social media sites from personal devices. See more…

Author: Dexter Johnson

The author is a an attorney who for the past 14 years has concentrated his practice in representing, successfully, investment advisers, broker-dealers, corporations and individuals who are subject to SEC, FINRA, State or other regulations and who may be the subject of regulatory examination, review or investigation. He formerly worked at the SEC. His regulatory and litigation experience has encompassed virtually every type of securities issue in the industry. He has also negotiated favorable outcomes in many of these matters for his clients.