• FINRA Webinar: Compliance Considerations for Social Networking Sites

    If you happened to miss it, FINRA hosted the Social Networking Compliance webinar this afternoon.  Here is a summary from their site on what was scheduled to be discussed:

    “This webinar covers compliance and regulatory considerations when using social networking sites to communicate firm business. With the advent of Facebook, LinkedIn, MySpace and Twitter, business use of social networking sites has become popular and can present supervision challenges for firms. Panelists from FINRA discuss the guidance that was recently issued in Regulatory Notice 10-06.”

    If you already read Regulatory Notice 10-06 you didn’t miss too much. I will say the most valuable part was the Q&A from the audience and FINRA staff. As you might expect the FINRA team focused on the overarching guidelines but didn’t spend too much time interpreting specific situations. They made it very clear that this is the responsibility of the firm to evaluate a sites capabilities and determine what the firm’s policy will be on usage, supervision, record keeping, etc.

    If you are looking for more details on how these guidelines get interpreted for use on social networks you should download the Companion Guide to FINRA Social Networking Compliance.

    And if you are interested in a summary of the webinar here are all of my live tweets that I posted during the session. Feel free to follow me on Twitter and send me any questions you have.

    • Joe Price talking about FINRA task force on social networking, 14 industry participants, came out with Notice 10-06
    • 5 key points, record keeping, suitability, types of content, supervision & 3rd party posts
    • Record Keeping: rules flow from SEC standards, no way to change this. Must retain, archive and retrieve to be compliant
    • Record Keeping: technology is going to be the issue, FINRA spoke to firms (including Socialwarewe solve this today with Risk Manager)
    • Record Keeping: discussing integration to enterprise archives, lot of interest in area, each firm needs to assess each solution
    • FINRA will not endorse any technology provider, firms need to assess the fit, determine if it delivers on compliance needs
    • interested in position on acceptable formats of social media messaging for FINRA filing and internal record keeping
    • Question: how do you file a tweet? Acceptable filing format is PDF for FINRA but not for retention (discovery issues, etc)
    • Suitability: 01-23 applies to social media directly, applies around recommendations, “call to action” or “suggestion”
    • Suitability: more specific to individual more likely it will be a recommendation, general news not a rec.
    • Suitability: call to action is key, not going to have prior approval requirement so be careful of what you post
    • Possible use of templates? Firms have libraries, drop a recommendation of an approved template, be careful of specific products
    • Question: “Business as such?” SEC term, not addressing it in Notice 10-06, books and records rule apply in this situation
    • Question: “if we decide to utilize social media we must have technology to track information” there are low tech options…
    • …technology is going to be key to make this scale
    • Question: “if a rep indicates where they work is that an advertisement?” ex: business card info on LinkedIn, likely already approved
    • Question: “business related inquiry on social media site?” addressing later, need to have procedures for reps to follow
    • Content Types: “interactive electronic forum” have def. of public appearance (i.e., chat rooms), must all be supervised
    • Content Types: public appearances do not need to be pre-approved
    • Content Types: blogs? static communication = advertisement = prior approval. However some allow for interaction
    • Content Type: These interactive blogs would be considered a public appearance (i.e., allowing comments)
    • Question: “What if firm hosts a blog and allows for 3rd party comments? What if it is a marketing brochure blog?” This is static
    • Content Types: key ideas, employees should have site use approved for use of logos, content, etc (the static elements)
    • Content Types: engaging on the sites can then be supervised post-use, these are the interactive pieces
    • Content Type: firms should decide on their own policies as part of this.
    • Content Types: key is whether or not a dialogue is supported or intended on these portions of social sites
    • Technology to capture content is still evolving, will there be compliance grace period? FINRA answer “No”
    • Firms must make the call if a vendor can meet the FINRA requirements (check out companion guide http://bit.ly/72HiGj)
    • Recently looking at a blog that wasn’t interactive, send email back and comment *not real-time interactive communication*
    • Question: “On Twitter, is initial posting interactive or static?” background content is static part, tweets are interactive
    • Question: “what if social site doesn’t allow for archiving?” answer don’t use it or use a 3rd party solution (i.e., Socialware)
    • Question: “what about broker-to-broker communication?” defined as institutional sales material (2211), already defined
    • Question: “How will FINRA test compliance?” FINRA provides policy guidelines, new process, examiners take steps to analyze steps  …
    • Question: …will look for supervisory steps, will look for policies, will look for other steps that compliance is being addressed with
    • Supervision: interactive communications can be supervised, implement risk based principles to review communications
    • Question: “Use of sites for recruiting?” Yes – they are subject to FINRA advertising rules, static vs. interactive
    • Question: Recruiting issue – expectation of earnings. Be careful here, this is most frequent issue
    • Question: “can registered reps conduct pre-approved, scripted, filed FINRA presentations via a webex type of application, w/instant messaging” …
    • …”assuming IM’s are being supervised by a reg. principle?” webinar=static, questions=interactive (can be supervised)
    • Supervision: can choose to pre-approve or not, can choose to sample pre or post, lot of flexibility, you decide
    • Supervision: communication between research and investment bank always need review, as well as incoming complaints
    • Question: “do personal social sites of RR need to be monitored to ensure not being used for professional use?” …
    • Question: … firms need to establish procedures/policies on this, once used for business firms are responsible,
    • Question: “don’t want reps using Facebook, agree not to, is firm responsible to still track?” I don’t know, maybe based on person
    • Question: “are firms accountable for how RR identifies themselves on personal SN site” firms need to adopt clear policies on this
    • Question: “does review of interactive communication have to be conducted by a registered principal” can be some delegation
    • Should not allow RR to use social media sites if you cannot supervise it (for business purposes)
    • Ensure you train those that are granted access, enforce your procedures, have consequences for violations
    • Question: “prohibit from using certain social site features, are firms accountable if RR use them if “prohibited”?” …
    • Question: Answer is same. They are responsible. (Socialware can disable these features completely to protect the firm – look at Feature Level Access Control of Risk Manager)
    • Question: “how do you supervise an anonymous complaint?” guidance already provided, must be able to identify person & issue
    • 3rd Party Posts: not subject to advertising rule (great clarity), situations where you can be held accountable
    • 3rd Party Posts: adoption & entanglement, you republish or direct people to content, you just adopted it and endorsed it
    • 3rd Party Posts: influenced posts, can you please post a testimonial to my Facebook page = entanglement
    • Question: “implicit endorsement of posts, rep didn’t remove a comment?” does not create an endorsement situation
    • Question: “RR retweets a post, is this an endorsement/entanglement” absolutely endorsement or adoption
    • Question: “What if you “like” a comment on Facebook” Yes absolutely that is an endorsement (FYI – Socialware can block this)
    • Question: “what if statement is just wrong, what should firm do?” adopt policy to enable quick action, still needs to be supervised
    • Adoption & entanglement is SEC concept, one-off answers not the way to go, each firm should develop a complete policy
    • Firms are doing a lot of different things to monitor 3rd party posts, complaints, publishing guidance
    • Great FINRA webinar, hope you enjoyed the live tweets, be sure to grab the Companion Guide for SN Compliance http://bit.ly/72HiGj

    Look for much more from Socialware on this topic. And if you haven’t registered for a Risk Manager invitation please do so here (it is free). Of course, if you want to get started right away you can sign up for the premium version here.

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2 comments on “FINRA Webinar: Compliance Considerations for Social Networking Sites

  1. Chad, thanks for the overview and the play by play. Very helpful given that there will not be a replay for several weeks from what I understand. Looks like you guys are on top of it with your platform!

  2. Adam says:

    Chad, good job providing a timely recap of the webinar. In the meantime, I have provided a complete spotlight on the 7 main points of the FINRA webinar. You can check it out here: http://bit.ly/cZ1O1Q and I would love to hear your thoughts.

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