Financial industry regulators have released new guidelines that outline what brokers and dealers can and cannot do on social media, calling on them to preserve text messages and to bear responsibility for third-party links and content.
The Financial Industry Regulatory Authority (FINRA) recently issued a regulatory notice, which includes recommendations on social networking websites and business communications. While the guidance is non-binding, it provides a framework for how brokers and dealers should behave online to avoid running afoul of FINRA regulations.
The new guidance focuses on the use of social media, texting, and providing clients with links to other internet websites.
FINRA calls on firms to retain records of digital communications related to their business. Whether these records should be maintained is based on the content of the communication, according to the guidance, regardless of whether it is sent by e-mail, letter or even text messaging.
The guidance also clarifies a previous statement that indicated that in most cases, firms are not responsible for third-party links posted by customers or others on a firm’s social media web presences. The new guidance adds exceptions, indicating that firms are responsible for those links that are paid for by others, in cases where the firm was involved in the preparation of the content that includes the link, or when the firm, brokers or dealers explicitly endorse or approve the content.
In addition, “a firm may not establish a link to any third-party site that the firm knows or has reason to know contains false or misleading content and may not include a link on its website if there are any red flags that indicate the linked site contains false or misleading content,” the guidance notes.
FINRA’s guidance indicates that the expanded rules are necessary as advertising, promoting and contacting customers through social media becomes more and more prevalent in the financial services industry.
“An April 2015 Pew Research Center report stated that based on a telephone survey of 2,002 adults conducted in December 2014, 64 percent of American adults own a smart phone of some kind. The same report indicated that based on a sampling survey of 1,635 respondents, 97 percent of smartphone owners used text messaging at least once during the 10-day study period in November 2014 making it the most widely used basic feature or application. In April 2016, Facebook Messenger reported 900 million monthly active users, and WeChat reported in March 2016 that it had added nearly 200 million monthly active users in the previous year,” FINRA noted in the guidance. “Consistent with these trends, firms have increasingly raised new questions regarding the application of FINRA rules to social media and digital communications.”