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August 23, 2011 at 08:00 PM
Financial Industry Regulatory Authority Inc. communications record retention rules apply to all communications devices and technologies, FINRA officials say.
FINRA, Washington, talks about the rules that govern member firms’ use of social networking websites and personal communications devices in FINRA Regulatory Notice 11-39.
The rules apply to FINRA member firms and associated persons and entities, including life insurance agents who sell variable life and variable annuity products.
The Rules
FINRA released an earlier batch of social networking guidance in January 2010, in FINRA Regulatory Notice 10-06.
Some of the other existing FINRA and U.S. Securities and Exchange Commission (SEC) rules that apply to FINRA members’ social media use include SEC Rule 17a-4(b) under the Securities Exchange Act of 1934 (SEA), which requires broker-dealers to save some records for at least 3 years, and NASD Rule 2210, a FINRA rule that governs “public appearances” in interactive electronic forums, such as message boards.
SEA Rule 17a-4(b)(4), for example, applies to “all communications which are subject to rules of a self-regulatory organization of which the member, broker or dealer is a member regarding communications with the public,” FINRA officials say. “The SEC has stated that the content of an electronic communication determines whether it must be preserved.”
NASD Rule 2210, which was created by a FINRA predecessor organization, exempts a member, broker or dealer from the need to get prior approval by a registered principal.
When making social media public appearances, “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,” FINRA officials say.
A firm must adopt procedures to keep the interactive electronic communications from violating FINRA or SEC rules governing matters such as a ban on misleading statements.
Answers
FINRA officials address questions about use of new communications services and technologies in a question-and-answer section.
FINRA officials note in the first answer that SEA Rule 17a-4(b)(4) recordkeeping requirements have nothing to do with whether a person associated with a FINRA member firm uses a personal device or technology to make the communication.
