Saturday, May 15, 2010

FINRA's Social Media Regulations

Recently, I have been counseling members of the securities industry about the new Financial Industry Regulatory Authority (FINRA) social media regulations. During a meeting last week, I was asked what type of interaction is acceptable between a registered securities employee and a Facebook friend who also happens to be a client of the securities industry professional. I gave the standard line that lawyers are taught to provide, "it depends." There is no bright line definition of what is acceptable interaction so this is a major dilemma for securities firms, their employees, their clients, and prospective clients.

The lines between business and personal activities in social media are becoming more blurred every day. In 1999, NASD (FINRA's predecssor) stated that if a registered representative participates in an Internet chat room he is subject to the same requirements as if he was making a personal presentation to a group of investors. This statement was codified in 2003 by NASD's Rule 2210 when NASD included in the definition of "public appearance" the "interactive electronic forum" or as most users call it a "chat room".

In January 2010, FINRA's Social Networking Task Force created a Regulatory Notice to provide securities firms guidance on business related social media usage. Even though the Regulatory Notice does not provide guidelines on securities employees' personal social media use, it is highly advisable for most firms to create a social media policy for employees' personal use. Creating a social media policy for non-business activities may be considered very intrusive. However, social media is the most intrusive and interactive technology currently in widespread use so it is imperative that employees understand that sensitive work matters should not be discussed on both business and personal social media accounts. No two firms have the same corporate culture so adopting the business or personal social media policy of another firm without consulting your legal, IT, human resources department, and a social media professional is a recipe for disaster.

To learn more about creating a business and/or a personal social media policy for your firm you may contact me at

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