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May 01, 2017 at 09:58 AM
Broker-dealers must keep text messages, reps are allowed to share certain firm-created content using their personal media accounts and unsolicited third-party comments on social media are not testimonials, according to new guidance on social media and texting issued by the Financial Industry Regulatory Authority.
Regulatory Notice 17-18, Social Media and Digital Communications, is the third social-media related notice the self-regulator has issued and comes in response to requests by broker-dealers that have expanded their use of digital communications.
The two other Regulatory Notices 10-06 and 11-39 provided guidance on the application of FINRA rules governing communications with the public to social media sites and the use of personal devices for business communications.
FINRA’s third social media-related guidance, issued in Q & A format, is also in response to a recommendation in FINRA’s Retrospective Rule Report on the Communications With the Public Rules.
The self-regulator answers 12 questions posed by BDs and reps.
For instance, one asks whether a broker-dealer is required to retain records of communications related to its business that are made through text messaging apps and chat services.
FINRA’s reply: Yes. “As with social media, every firm that intends to communicate, or permit its associated persons to communicate, with regard to its business through a text messaging app or chat service must first ensure that it can retain records of those communications as required by SEA Rules 17a-3 and 17a-4 and FINRA Rule 4511. SEC and FINRA rules require that, for record retention purposes, the content of the communication determines what must be retained.”
However, Yasmin Zarabi, vice president of Legal and Compliance at Hearsay Systems, noted in a recent blog post that “several important complexities” are included in FINRA’s text messaging requirements.
“FINRA specifically says if your firm ‘intends’ to communicate, then it should first have record retention in place; however, it is unclear how ‘intend’ is interpreted. For that reason, if your firm is in executive discussions regarding text messaging, then it should be thinking about having the proper compliance tools in place for supervision and record-keeping of texts,” Zarabi wrote.
Another “gray area,” she continued, “is the difference between what makes something a personal communication versus a business communication. Are there topics which advisors can communicate with clients that are not deemed as business communication under FINRA rules? FINRA states that the content of the communication determines what must be retained. As such, a firm would not be able to decipher what is or isn’t considered business communications unless it has clear policies and technology in place that can help clarify such complexity.”
