Targeted Examination Letter: Social Media Communications Spot-check – July 9, 2013
Over the last two years, regulatory guidance regarding social media has been provided by the Financial Industry Regulatory Authority (“FINRA”) and other regulatory organizations. Now, FINRA appears to be focused on conducting reviews of social media usage. In June 2013, FINRA’s Advertising Regulation Department (“the Department”) issued a targeted examination letter with respect to social media communications. In it, the Department notes that, pursuant to FINRA Rule 2210(c)(6), written (including electronic) communications by member firms are subject to periodic spot-checks by FINRA. The June 2013 letter constitutes this type of spot-check and requests the following information.
- The Department asks firms to explain how they use social media (e.g., Facebook, Twitter, LinkedIn, blogs) at the corporate level in conducting their business. In particular, they should identify the business purpose of each social media platform employed.
- The letter also asks member firms to provide
- the URL for each social media site used at the corporate level,
- the date these sites began to be used, and
- the identity of all individuals who post and/or update content on these sites.
- The letter further instructs firms to explain how their registered representatives and associated persons generally use social media to conduct business, including the dates the firm began allowing such use and whether the usage continues.
- In addition, the Department asks targeted firms to provide the portion of their written supervisory procedures covering production, approval, and distribution of social media communications that was in effect from February 4 through May 4, 2013.
- The letter asks broker-dealers to detail the measures adopted to monitor compliance with their social media policies (e.g., training meetings, annual certification, technology).
- Finally, the Department asks firms to include a table listing the firm’s top 20 producing registered representatives (based on commissioned sales) who used social media for business interactions with retail investors as defined in FINRA Rule 2210(a)(6) from February 4 through May 4, 2013. For each individual included, the table should list full name, type of social media used for business purposes over this time span, CRD number, and the dollar amount of sales and commissions earned during the period.
ACA reminds broker-dealers to ensure their procedures address social media. The firms’ practices should follow the guidance provided in Regulatory Notices 10-06 and 11-39.
To keep better informed on new developments and receive advice and information on broker-dealer best practices, please contact your ACA consultant. Alternatively, please contact Dee Stafford at (310) 322-8840.