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SPOTLIGHT ON FINRA SOCIAL MEDIA WEBINAR

HTTP://EVERYDAYTENACITY.COM/ASSET-MANAGEMENT-
MARKETING/SPOTLIGHT-FINRA-SOCIAL-MEDIA-
WEBINAR-HIGHLIGHTS

INTRODUCTION
After releasing their regulatory notice 10-06, FINRA conducted a
webinar including interactive Q&A session on February 3, 2010 to
expound on and hopefully clarify their guidance on the use of blogs
and social networking sites for communications sponsored by a
financial services firm or a registered representative.

Read on to see all you missed and get spotlights of the webinar
content and Q&A.

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BACKGROUND

In an earlier article, provided here (http://everydaytenacity.com/asset-


management-marketing/finra-social-media-guidance-key-highlights) , I covered
my initial reactions and key highlights of FINRA’s regulatory position on social
media for the Investment Management and Asset Management industry.

On February 3, 2010, almost 700 people registered for FINRA’s webinar on


Social Media and notice 10-06. There were likely more than that number of
actual participants as firms shared registration access across numerous
participants. FINRA’s webinar team was chaired by Thomas A. Pappas
(Moderator), who is Vice President and Director of FINRA’s Advertising
Regulation Department. Also participating from FINRA were Joseph E. Price a
Senior Vice President, Corporate Financing/Advertising Regulation and Amy C.
Sochard a Director, Programs and Investigations, in FINRA’s Advertising
Regulation Department.

At times, the discussion between FINRA’s team was lively, but in the end, 7 main
points were spotlighted in the FINRA material and ensuing Q&A.

The spotlights were discussed at an superficial level and each firm needs to
evaluate the sites they or their representatives are participating in and
determine what the firm’s policy will be on supervision, record keeping, prior
approval etc.

7 MAIN SPOTLIGHTS

1. Recordkeeping Responsibilities:
o SEC Rules 17a-3 and 17a-4 and NASD Rule 3110 apply and firms
must retain records of communications related to their “business as
such.”
o Technology is being developed by industry vendors but each firm
must determine whether any particular technology provides the
necessary retention and retrieval functions to comply.
2. Suitability Responsibilities:
o Standard suitability rules apply to recommendations made through
social media Web sites. NASD Notice to Members 01-23 provides
guidance regarding online suitability.
o Recommendation of specific products subject to a firm’s existing
rules which include required disclosures. Firm’s can and should

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consider prohibiting interactive electronic communications that
recommend specific products.
3. Types of Interactive Electronic Forms:
o Unscripted participation in an interactive electronic forum such as
a chat room or online seminar is the same as a “public appearance”
based on the definition of “public appearance” in NASD Rule 2210.
o Public appearances must be supervised, but do not require prior,
written approval of a registered principal. Content posted on a
social media Web site may be treated as a public appearance
depending on the facts and circumstances.
4. Blogs:
o Static postings are consider advertisements, but real-time,
interactive communications with third parties on a blog would be
considered participation in an interactive electronic forum, the
same as a “public appearance”.
o Frequency of content updates to static postings does not play a role
in distinguishing between advertisements versus “public
appearance”.
5. Social Networking Sites:
o Profile, background or wall information = advertisements, but
interactive communications via a social networking site are
considered a “public appearance”.
o Time elapsed on an interactive communication does not make that
content static. For example, if a real-time tweet is up for a long
period of time, that tweet is still considered a “public appearance”.
o Some social networking sites may enable communications from
Rep-to-Rep or Rep-to-Broker/Dealer. These communications are
covered by NASD rule 22-11, defining institutional
communications, and provides for more flexible compliance
guidelines.
6. Supervision of Social Media Sites:
o Prior principal approval is not required, but firms must supervise
these communications with proper procedures similar to those
outlined for electronic correspondence in FINRA Regulatory Notice
07-59.
o If a firm wants to take a conservative approach, they can require
principal review of some or all interactive electronic
communications prior to use. It is up to each and every firm to
make that judgement call.
7. Third-Party Posts:

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o Third-party posts are not subject to FINRA’s advertising rules
unless the post is attributable to the firm due to preparation of the
third-party post’s content; or, explicitly endorsing or approving the
content.
o “re-Tweeting”, “Liking” or “Voting For” a third party post would be
considered endorsement by FINRA.
o If a registered rep requests a third party to comment on or provide
positive feedback on content, this is equal to entanglement by the
FINRA regulations.

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