Social Media Compliance Imbroglio At Netflix Illustrates Risk Securities Firms And Professionals Face From Unregulated Use Of Twitter, Facebook, And LinkedIn Hot

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FINRA Regulatory Notices 10-06 and 11-39 (the “Notices”) offer guidance regarding associated persons’ use of electronic means to communicate with the public.  Such communications are generally subject to the same rules that apply to in-person or written communications, and may constitute “correspondence” (e.g., e-mail), a “public appearance” (e.g., LinkedIn or Facebook), an “advertisement” (e.g., Twitter) or “sales literature” (e.g., Facebook discussions). 
Among other things, the Notices outline firms’ requirements for recordkeeping, which apply to all communications, and oversight, which differ depending on whether the communication is “static” (e.g., blog postings), or “interactive” (e.g., chat rooms).  Static content, like profile and wall information, are considered “advertisements,” that require prior approval by a registered principal.  On the other hand, interactive content involving real-time communications does not require such approval.  FINRA places the onus squarely on Member Firms to determine into which category employees’ electronic postings fit, and to establish written supervisory procedures and systems to assist them in these determinations.

While social media sites like Facebook, LinkedIn, and Twitter hold great potential for marketing financial services, FINRA constraints mean such sites pose some regulatory risk.

Supervision is key, and firms’ legal and compliance departments need to stay current with both changes in technology and the law.  Securities firms examine their social media policies, oversight and training, and implement protocols for prepublication review of social media postings by all personnel. 


As we have learned, even seemingly innocuous posts on Facebook can trigger unintentional regulatory scrutiny that cause needless distraction from running your business.

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