FINRA Clarifies How Firms Can Use Facebook

By Amy McIIwain, President, Financial Social Media on Thursday, September 1st, 2011


Most mid-sized securities firms are struggling to understand how to use Facebook in their business. They know that Millennials, affluent investors, and the rest of American industry are way ahead of them in its adoption. But they’re worried that examiners from FINRA or the SEC could ask questions that they don’t know how to answer, resulting in disciplinary action.

Fortunately, FINRA last month released Regulatory Notice 11-39 for its member firms. It lifts the fog. 

Some securities firms are taking a phased approach to getting into the social media ocean. Let’s say your firm is one of them.  

After creating a policy and establishing other regulatory requirements for a program, you set up a corporate Facebook Page.

You’ve decided to use the platform to engage with clients, establish thought leadership, and build your brand. (You probably will want to use Twitter and LinkedIn, too, but I’ll leave that for another post.) The logo and design, company information, and description on your new Facebook Page are just the way you want it.

Who Needs to Approve It?

A registered principal of your firm. Why? There are two basic types of information on social media as defined by FINRA: static and interactive. Static material is like an advertisement and must be pre-approved by the principal. Interactive is like an public speaking appearance and requires post-review by your compliance team.  Not all unscripted participation in an interactive forum, such as a Facebook Wall, needs to examined in a post-review process. It can be done by sampling or a using a Lexicon search. 

Do you also need to submit your new page to FINRA’s advertising department for approval? No. Only if you’re a new firm that has been in business for less than a year. 

What Can You Post?

Let's say your social media team finds an interesting study from a foundation about the growing use of the Internet or a pertinent report created in-house, writes a descriptive introduction, links to the document, and posts it to your Facebook page. Are those static, too, requiring pre-approval? No, they're interactive communications. Only the company document must be pre-approved. 

What If No One Comments?

Wait, you say, I’m confused! If no one comments on the post, does that make it static and subject to pre-approval? No, the item has been placed in an interactive forum and is subject to only post-review and your policy. Calm down.

If that post, however, for some reason is later copied and used in a print or television ad then, yes, it will need to be preapproved at that point by the principal.

Isn’t “adoption” bad?

Adoption is half of an SEC concept called “Adoption & Entanglement” that has been adapted for social media by FINRA. You will have adopted that foundation report we’ve been discussing that you posted on your Facebook wall. But there’s nothing wrong with that.

That’s what Facebook is about: sharing information. It’s only a problem if you know that the foundation study, for example, contains “false or misleading content” or if that you have reason to believe it could. Content must be “fair and balanced.”

The key is for these posts to be noncontroversial. A report by a nonprofit on how to care for babies, a community event, or a reputable economic report are okay to post on your corporate Facebook Wall. But don’t post an article by an outspoken columnist.  Just because you like that columnist doesn’t mean that an objective analysis wouldn’t find his or her writing to be “false or misleading.”

Should You Archive?

Yes you should. If it’s a “business communication,” as something posted on your corporate page is, it must be retained for a minimum of three years, retrievable, and supervised. That includes “all communications received by a firm,” such as a comment.  

What about Likes?

According to a source at FINRA, Facebook “Likes” are still problematical. With a Facebook Like, you are not just sharing information but recommending entire Pages. That would require pre-approval of a registered principle of your firm. Good luck with that.

SCOTT PETERSON is co-founder of Relay Station Social Media LLC. A former NYSE Regulation managing director of communications, NASDAQ communications director, and NASAA director of public affairs, he provides integrated Internet marketing, compliance solutions, training, and more to a wide range of organizations.


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