By way of overview of the currently regulatory environment, FINRA highlighted that member firms have an obligation to maintain records of business communications regardless if those communications appear on social media. FINRA also reminded member firms that the use of static social media for a business purpose requires pre-approval by member firm. Conversely, interactive electronic forums do not require member firm pre-approval, but the firms have to adopt risk-based supervisory procedures that utilize post-use review. With respect to links to third-party sites, FINRA cautioned that a member firm cannot establish a link with a site that the firm knows or has reason to know contains false or misleading information. Finally, FINRA reminded member firms that they must adopt procedures to manage data feeds to their own websites to ensure the accuracy of the information contained in such data feeds.
In response to specific questions, FINRA reminded firms that firms and associated persons cannot sponsor a social media site or use a communication device that automatically erases or deletes its content. Such a site or device is counter to the record retention obligations of Securities Exchange Act Rule 17a-4. Likewise, the use of a personal device for business purposes must be set up to allow for the retention of regulated communications. Moreover, the record retention obligation does not vary if a firm or registered person is using a static or interactive website.
As to the debate between interactive and static content, FINRA cautioned that interactive content can become static if it is copied or posted to a static forum. In that instance, there must be pre-approval of the posting. Similarly, a material change of static content will require new approval by the member firm.
Finally, FINRA provided guidance where member firms co-brand a third-party site such as where a member firm places a logo on a third-party site. In that scenario, FINRA stated that a member firm is responsible for the content of the entire third-party site. A firm would not be responsible for the content of a third-party site where the firm does not adopt or become entangled with the content of that site and the firm does not know or have reason to know that the site contains false or misleading information.
I believe that all of this guidance, although helpful, is serving as nothing more than a warning to member firms. Either have proper supervision in place for the use of social media, or the full weight of FINRA will come to bear. It is critical that member firms have a uniform compliance system to ensure regulatory compliance and reasonable supervision over the use of social media by the firm and associated persons or be forewarned that FINRA may be coming to visit.