“The Internet’s not written in pencil,” Facebook founder Mark Zuckerberg’s girlfriend warns him in the movie The Social Network. “It’s written in ink.”
According to two attorneys at Sutherland Asbill & Brennan, this quote sets the tone for the online regulatory environment for advisors.
The attorneys published an article in the June issue of Banking & Financial Services Policy Report using The Social Network, the 2010 film about the rise of Facebook, to demonstrate the rise of enforcement against financial advisors for social media infractions.
“Although Internet content does not disappear (too easily), when it does, it can have far-reaching and long-lasting effects on firms and representatives who use it,” Brian Rubin and Caroline Crenshaw wrote.
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Rubin is a partner in Sutherland’s Washington, D.C., office and leads the firm’s securities enforcement and litigation practice team. Crenshaw is a member of Sutherland’s litigation practice group.
To mitigate those long-term effects, advisors need to have well-documented processes in place for all their communications: email, instant messaging, blogs, social media and any platform yet to come along.
Broker-dealers have to keep business-related records for at least three years, according to the paper, and the first two of these have to be easily accessible. Investment advisors have to keep business-related records, including recommendations, disclosure documents and advertising, in their principal office for at least two years; then they can move them to another (readily accessible) location for another three years.
A case in 2007 showed that just keeping the records wasn’t enough, though. According to the paper, FINRA fined a firm in August 2007 for failing “to preserve, review or retain emails sent via external accounts.” Enforcement actions were brought against firms that were unable to prove that personal email accounts weren’t being used to do business, electronic systems were being maintained properly and emails were readily accessible.