Must Tweets by Securities Reps Be Pre-Approved? NO!

By Amy McIIwain, President, Financial Social Media on Wednesday, September 14th, 2011

When Morgan Stanley Smith Barney announced in May that it will allow its 17,800 financial advisers to use Twitter in October, I said it was a breakthrough. Here was a major Wall Street wirehouse recognizing that the social media revolution was real and that it had to be part of it.  


I took a few arrows for that call. Some bloggers and writers thought I was foolishly naive and didn’t understand the fine print. Didn’t Morgan Stanley state that they would allow advisors to use only pre-approved tweets? Didn’t that undercut the conversational power of Twitter?


Well, yes it does… if that’s what Morgan Stanley decides in its social media communications policy. But the fact is that FINRA does not require its member firms to pre-approve tweets.

Love that 11-39


Let’s take a look at FINRA’s latest guidance of the use of social media, 11-39, issued in August. We’ve posted it on our website, along with other laws, rules, and guidance relevant to the use of social media in the financial industry.  You can access the page by clicking here. Here are some critical passages:


FINRA considers unscripted participation in an interactive electronic forum to come within the definition of ‘public appearance’ under NASD Rule 2210. Public appearances do not require prior approval by a registered principal.

So is Twitter interactive? I ask you—is the earth round?


I can hear the compliance-minded among you asking, but doesn’t FINRA require that these unscripted communications be supervised? FINRA says:

Firms may adopt risk-based supervisory procedures utilizing post-use review, including sampling and lexicon-based search methodologies, of unscripted participation in an interactive electronic forum.

OK. But what about attachments?


Part of the power of Twitter comes not from an individual Tweet limited to 140 characters, but to the document, photo or even video that’s attached to the Tweet. The answer to that question is: it depends. If you are attaching something that’s produced by your firm, then it requires pre-approval. Again, in the words of FINRA’s 11-39:

A static posting is deemed an ‘advertisement’ under NASD Rule 2210 and therefore requires a registered principal to approve the posting prior to use.

But if you are attaching a blog post from the U.S. Department of Labor about the meaning of Labor Day or an infographic from Twitpic on how Americans pay for college (both examples taken from TIAA-CREF’s Twitterpage), you are sharing information.  That type of sharing is what social media is all about! It is only a problem if you know the attachment contains “false or misleading content” or if you have reason to believe it could. 


The bottom line: As long as a Tweet is subject to post-sampling and review, and does not deviate from a firm’s social media policy, pre-approval  is not required. 

I suspect Morgan Stanley already knows that. 

(NoteA FINRA rule change proposal awaiting SEC approval will further clarify the use of social media in the securities industry. It will consolidate six current categories of communications into three and states, in essence, that if you don’t make any financial or investment recommendation or promote your firm’s product or service, you would not need to have a principal pre-approve your social media communications prior to use.

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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