Broker Dealers and Investment Advisers Need to Have Policies and Procedures in Place for Social Media Use

October 04, 2011

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A recent FINRA enforcement action highlights the need for broker dealers and investment advisers to implement policies and procedures for social media use. FINRA alleged the registered representative created websites related to her firm without obtaining firm approval, on several occasions she falsely stated online that she was not affiliated with any broker dealer, and she was using her Twitter account to give stock recommendations without making the necessary disclosures.   As a result of this alleged conduct, FINRA fined her $10,000 and suspended her from associating with a broker dealer for one year.

This FINRA enforcement action should serve as another reminder that if you have not already done so, it is time to implement policies and procedures that address retention of online communication, supervision of representatives’ use of social media, and how your firm will be represented online. While the US Securities and Exchange Commission (“SEC”) has not released any guidance on social media use, FINRA has issued Regulatory Notice 10-06 and Regulatory Notice 11-39 which provide guidance on using social networking sites for business communications. Although FINRA rules do not govern an investment adviser firm (which is not a FINRA member), these FINRA regulatory notices provide a good reference point in lieu of the absence of specific guidance from the SEC.

If you would like to learn how the SEC’s existing advertising rules apply to the use of social media by your investment adviser or its investment adviser representatives and best practices for supervising such social media usage, please purchase a seat for $59.95 to our upcoming webinar, “Compliance for Social Media,” on Thursday, October 13, 2011 at 12:00 p.m. Central by clicking here. If you would like to discuss how RIA Compliance Consultants, Inc. can help your registered investment advisor update its written policies and procedures with respect to social media usage, please schedule a time through our online calendar.  Simply click here and select an available time that is convenient for you.  One of our consultants will then give you a call at your selected time.

Posted by Bryan Hill
Labels: Compliance Program, Compliance Training, Compliance Violations, Social Media