FINRA releases new guidance regarding social media and digital communications

Abstract

Purpose

In April 2017, FINRA issued a regulatory notice addressing the use of social media and digital communications by broker-dealers. The notice expanded on previous FINRA guidance on these topics. This article provides clarity regarding how social media and digital communications fit within the requirements of various FINRA rules and provides guidance to firms and their registered representatives.

Design/methodology/approach

The principal topics addressed by FINRA’s regulatory notice are: (a) text messaging, (b) personal versus business communications, (c) third-party content and hyperlinks, (d) native advertising, (e) testimonials and endorsements and (f) links to BrokerCheck. This article presents an overview of each of these topics, respectively.

Findings

Under recordkeeping requirements, firms must ensure that they are able to retain communications made through text messaging and chat services. Business communications, which relate to the products or services of the firm, are subject to filing and content requirements, while personal communications are not. Under certain circumstances, third-party posts on social media sites established by the member and testimonials may be attributable to the firm. Native advertising, while permissible, must comply with content requirements. Firm-created electronic applications do not have to provide a link to BrokerCheck.

Originality/value

Firms and their registered representatives will gain a better understanding of what is permissible pursuant to FINRA and SEC rules as they communicate digitally and via social media.

Citation

Sacks, R., Morton, J., Jordan, J., Blau, S. and Kelly, S. (2017), "FINRA releases new guidance regarding social media and digital communications", Journal of Investment Compliance, Vol. 18 No. 4, pp. 40-44. https://doi.org/10.1108/JOIC-08-2017-0049