Financial Advisors and Social Media: FINRA Notice 11-39

In our previous blog post, we discussed FINRA notice 10-06 and its implications relating to the use of social media by financial advisors and broker-dealer firms. We discussed at length how important it is for financial advisors to be careful about social media so as to not run afoul of FINRA and SEC rules. This post continues with a discussion of FINRA Notice 11-39.

Notice 11-39 covers some of the same ground as the previous notice, offering a bit more detail in several key areas. It also addresses concerns the previous notice did not. As for the scope of the new Notice, it is essentially the same. The notice is intended to provide adequate guidance to financial advisors and broker firms about how social media can, and cannot, be used within the realm of financial services.

Areas Covered by Notice 11-39

Like FINRA Notice 10-06, this follow-up notice deals with five key areas. There is some overlap between the two notices. Where the overlap occurs, Notice 11-39 offers clarification. The five areas covered are:

  • Record Keeping – Notice 11-39 clarifies record keeping by addressing the fact that it is the content of social media messages that determines whether said messages relate to the business of a financial advisor or dealer-broken firm. Postings with certain kinds of content must be retained while others falling outside the scope of business need not be retained.
  • Social Media Supervision – Notice 11-39 further clarifies the rules for supervising social media use and content in different areas, including advertising. The clarification of supervisory rules in no way impacts record keeping rules.
  • Third-Party Participation – Third-party participation in social media communications – vis-à-vis client responses and outbound links – must be scrutinized for misleading content as clarified by Notice 11-39.
  • Personal vs. Business Use – The notice draws a distinction between personal and business use of social media and explains the requirement to keep such communications separate so that business communications can be properly retained.
  • Personal vs. Business Devices – FINRA rules recognize that financial advisors may use personal devices and/or devices issued by a broker-dealer firms to engage in social media communications. The source of the device used does not affect the broker-firm’s responsibilities to supervise social media use, or to maintain records of such communications.

By issuing the new notice, FINRA was able to clarify some points that were rather ambiguous in the previous notice. However, it is still possible that some confusion remains. Financial advisors should consider contacting FINRA for clarification as well as downloading appropriate documents, including PDF copies of both notices. The notices are available on the FINRA website.

A Social Media Reminder

In closing this post, it is important that we remind financial advisors and dealer-broker firms of their responsibilities relating to social media use. You already know that the financial services industry is heavily regulated by multiple government agencies, including the FINRA and SEC. The many rules initiated by these agencies tend to be confusing in areas where they overlap. Social media is one such area.

It is never a good idea to engage in social media communications if you are not thoroughly apprised of how the rules affect your online content. It is far too easy to run afoul of the law with just a single social media post. Both advisors and their dealer-broker firms need to tread very lightly and ensure that all rules and regulations are followed. That means maintaining adequate records, supervising how social media is used, being careful about third-party content, and so on.