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Regulation and Compliance > Federal Regulation > FINRA

Social networking: Nirvana or nightmare?

By Steven McCarty

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What’s not to like about social networking sites? They give you free access to millions of consumers. They give you a mechanism for building relationships with these consumers. And they facilitate easy publishing of your insights, making them the drip marketing system of your dreams.

But the marketing power of sites such as Facebook, Twitter and LinkedIn give compliance officers night terrors. They are so easy to use and so viral that the line between marketing success and compliance
catastrophe is extremely thin. Consider this scenario:

An agent posts a positive statement about Safe Haven Life on his Facebook fan page. Next thing you know consumers come out of the woodwork to disagree. “How can you like them? They ripped (me, my spouse, my mother-in-law, my dog) off!”

The agent tries to defend his statement, but more and more consumers come forward with horror stories (imagined or real). Soon a Facebook protest group is formed, “Victims of Safe Haven,” which spirals like a recurring nightmare. What started out as an innocent Facebook post turns into an online PR fiasco. Is it any wonder compliance hand-wringers have circles under their eyes?

Still, little by little, they’re coming around. They realize they need to find a way to empower advisors to use social networking sites responsibly. FINRA’s new guidance (Regulatory Notice 10-06) also clarifies things. I suspect the number of securities and insurance companies who allow their advisors to network on Facebook, Twitter and LinkedIn will grow steadily from this point forward.

Having said that, you still have to know the rules. Here are a few to get you started (your state may require more):

  • Be careful recommending a specific security. If you do, you may trigger FINRA’s Rule 2310 (on suitability), which may require prior approval and additional disclosures.
  • Understand that everything you say on an interactive platform is a “public appearance.” You don’t need to clear your statement, but it must adhere to FINRA content standards of “fair dealing, good faith, balanced,” etc.
  • Treat your professional/company LinkedIn and Facebook profiles as advertising. So get it approved before posting.
  • Make sure your posted comments are professional. Since they are considered “dynamic” content, they don’t need prior FINRA approval, but they must be fair, balanced, etc.
  • If you’re an investment advisor representative, do not solicit LinkedIn client testimonials. That’s illegal.

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