This week, FINRA released Regulatory Notice 10-06, which urges firms to develop customized policies and procedures for blogging and social networking. FINRA issued the notice after several firms asked for guidance on the subject. The goal of the notice is to ensure that investors are protected from false or misleading claims posted on any social networking sites.
Some of the recommendations provided by FINRA are listed below.
- Retain records of communications related to the business made through social media sites;
- NASD Rule 2310 may be triggered if a firm recommends a security through a social media site, depending on the facts and circumstances surrounding the recommendation;
- Firms should consider prohibiting all interactive electronic communications that recommend a specific investment product and any link to such a recommendation, unless a registered principal has previously approved it; Firms may also want to maintain a database of previously approved communications;
- Static blog postings are considered advertisements under NASD Rule 2210;
- If the blog includes real-time interactive communications it is considered to be an electronic forum that does not require prior principal approval, but must be supervised;
- Firms must supervise communications on social networking sites under NASD Rule 3010 in a manner that ensures compliance with FINRA’s communication rules; FINRA’s Regulatory Notice 07-59 provides further guidance on supervisory procedures;
- Generally, FINRA does not treat posts by customers or other third parties as the firm’s communication with the public subject to NASD Rule 2210; However, third-party posts are attributable to the firm if the firm has involved itself in preparing the content or the firm explicitly or implicitly endorses or approved the content.