Legal Alerts

The Communication Rules and Social Media: Preventing Common Pitfalls

07.01.13

The Communication Rules and Social Media: Preventing Common Pitfalls

Sharda R. Kneen

Earlier this year, FINRA’s consolidated “Communications with the Public” Rules went into effect. The “Communication Rules” constitute an extensive reworking of the approval, filing and content requirements regarding certain categories of communication, including communication made through social media. Recently, FINRA released a podcast reviewing how these “Communication Rules” apply to situations involving social media and what member firms can do to avoid possible violations, particularly when it comes to following hot button areas:

Retention
Under the Communication Rules, member firms can decide on their own whether or not to let their registered representatives use social media for business communications. Should a member firm decide to permit such use, however, the firm must ensure that they have in place policies and procedures for capturing and retaining all such communications. Firms are advised to keep in mind that regardless of the form of the communication, the content of the communication is what determines whether or not a record must be kept. All business related communications, including those taking place through social media, must be retained.

Third Party Communication
Members should be cognizant of the potential issues associated with having a website or social media site that allows third parties to post comments or information. While information posted by third parties is generally not considered to be the firm’s information, it can become attributable to the firm if someone from the firm was involved with preparing the content or endorses or approves it. For example, if a registered representative asks a customer to post a business-related comment on the firm’s social media site, it is very likely that FINRA will deem the firm responsible for the comment under the Communication Rules.

Social Media Sites Maintained for Personal Use
Firms should advise their registered representatives on the appropriate protocol for inquiries or comments about the firm’s business that the registered representative may receive on a social media site maintained for the registered representative’s personal use. Under the Communication Rules, in these instances a registered representative cannot post a substantive response to the inquiry, but may provide a non-substantive response, such as directing the third party to contact the registered representative through the firm’s email system. To streamline this process, firms should even consider providing registered representatives with pre-approved statements to use in these situations.

For daily industry-related updates, follow Sharda on Twitter @shardakneen.

Contact
LaFromboise, Antoine J.
Communications and Brand Manager
T 612.371.3269

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