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Practice Management > Marketing and Communications > Social Media

FINRA Prepares New Social Media Guidance for BDs

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The Financial Industry Regulatory Authority (FINRA) plans to release to the Securities and Exchange Commission (SEC) in a matter of weeks new guidance on social media usage by broker-dealers and their advisors.

The additional guidance, which must first be approved by the SEC, won’t “change any of the fundamental principles” in FINRA’s Regulatory Notice 10-06, which was released in January 2010 and focuses mainly on recordkeeping rules for social media usage, said Joseph Price, senior VP for advertising regulation/corporate financing at FINRA, during remarks at the Insured Retirement Institute’s (IRI) regulatory conference in Washington on Tuesday.

Price said the additional guidance would not upend social media systems that have been developed by BDs and advisory firms. The guidance — which Price said is now being reviewed by senior staff at FINRA and will be sent to the SEC in the “next week or two” — will be released in a Q&A format and will include FINRA’s responses to questions it has received since release of the 2010 regulatory notice. FINRA “recognizes that we need a lot of industry input on social media policies,” Price said.

Price was joined by Mitchell Bompey, executive director, legal and compliance at Morgan Stanley Smith Barney, who offered these facts about social media usage.

  • In July 2009, social media surpassed e-mail in number of worldwide usage;
  • 50% of baby boomers are active on social media;
  • 50% of investors with $1 million or more in assets are active on social media;
  • 3.5 million tweets will be sent across Twitter in the next hour, with the average number of tweets per day at almost 40 million;
  • 71% of all internet users are on Facebook;
  • Social media accounts for 1/3 of the time users spend online in the United States; and
  • Consumers are using social media as a powerful tool for criticism and praise.

Morgan Stanley pioneered the concept of allowing its advisors to use social media by announcing in mid-May that it would allow about 600 advisors to fully access LinkedIn and partially access Twitter starting in late June.

Bompey told AdvisorOne that Morgan Stanley “will monitor communications heavily during the initial rollout with its 600 FAs, and then evaluate the process going forward.”

Over the next six months, Morgan Stanley plans to allow its approximately 17,800 financial advisors to have access to the two social-media outlets.

Bompey said that while everyone is clamoring to engage in social media not everyone is sure about what “social media” actually means. According to Wikipedia, he said, social media “is the use of web-based and mobile technologies to turn communication into interactive dialog.”

Social media “categories” are as follows:

  • LinkedIn and Facebook are considered Communication/Social Networks;
  • Wikipedia falls under Collaboration;
  • Flickr is Multimedia Sharing; and
  • Yelp is considered Reviews.

Bompey went on to explain that the corporate use of Facebook is different than having your own personal page. For instance, he said, there’s no in-box or “friending” on a corporate page. Facebook also allows you to “turn off” the sponsored and advertising bars, so firms can decide how “close [they] want third-party advertising to be” to their page.

Twitter, Bompey said, is another “immediate venue” that Morgan Stanley uses to “get the word out about other [web] sites we want people to visit.”

And YouTube is also a social media outlet where “a lot of firms create their own corporate channels,” Bompey says, but as with other social media sites, firms have to “monitor the comment box.”

Price noted that FINRA has seen videos posted on YouTube by broker-dealers promoting products and services. “If these [videos] are not fair and balanced, we will contact the firms and tell them,” he said.

LinkedIn, which is mostly used for “business contacts” and provides a venue for people to display their profile and post status updates, also provides a “private email system called In-Mail,” Bompey said. These private messages “need to be retained and supervised.”

LinkedIn can also be used for “prospecting,” he said, but the “danger is the ‘recommendation’ function,  where people can post recommendations on you.” Morgan Stanley, he continued, is working with a tech vendor “to block that function. We have policies against receiving recommendations.”

Price said he’d like to see the SEC define business-related communications. “There’s little, if anything, out there on this,” he said.


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