The Socially Savvy Advisor + Website: Compliant Social Media for the Financial Industry

Chapter 31What Are the Investor-Protection Rules as They Relate to Social Media?

Regulators are responsible for overseeing the welfare of investors. That covers a broad range of issues, and increasingly the use of social media by financial professionals is coming under scrutiny. In June 2013, for example, the Financial Industry Regulatory Authority (FINRA) issued a so-called targeted examination letter (also known as a sweep letter) to a number of broker/dealers (see Figure 31.1). Among other things, the agency was seeking:

• Explanations of how the firm and its brokers are using social media (specifically Facebook, LinkedIn, Twitter, and blogs) in the conduct of its business.
• The firm's written supervisory procedures concerning production, approval, and distribution of social media posts and other types of engagement.
• An accounting of how the firm oversees internal compliance with its social media policies.

Figure 31.1 FINRA's Letter to Broker/Dealers on Social Media Practices

Some of the requests were extremely specific. FINRA, for example, wanted a list of the top 20 producing representatives who used social media for business purposes to interact with retail investors between February 4 and May 4 of that year. (“Please identify the type of social media used by each individual for business purposes during this time period. Please include the individual's full name and CRD ...