New Guidelines From FINRA: Has Social Media Gone Mainstream?

by Shannon Paul on January 31, 2010

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Something interesting happened last week: FINRA, the Finance Industry Regulatory Authority, released new guidelines specific to social media sites for registered professionals and companies.

FINRA’s choice to differentiate between static and interactive content for social networking sites is something unique I’ve not seen in other types of regulatory guidelines related to social media.

I am not a lawyer, so for specific details or direct interpretation, please consult one.

Interactive “Postings” No Longer “Advertisements”

Under FINRA’s new rules, static content is to be treated as an advertisement subject to verbatim approval from a compliance official as well as a principal of the firm. Static content on social networks would be profile information, images, background graphics and other content that to remain somewhat permanent.

On the other hand, interactive content is classified as communication under FINRA’s new guidelines and does not require principal approval but does need to be supervised in a manner similar to email communication. FINRA’s member firms should already be accustomed to similar archiving and supervising procedures — these same guidelines now extend to activity in social networks.

Why This Signifies Progress

In the past, all online postings, including those now classified as communication, were instead regarded as advertisements and were subject to principal approval. Having a principal of the firm approve every single status update or posting to a social network like Twitter would seem downright prohibitive [read: not worth the trouble] to what many consider is the best way to participate: frequent, conversational posts.

Many see the new rules as a sign that social networks have entered the mainstream. What do you think?

Supervision and archiving are still a key part of the process for FINRA companies, but firms are not held accountable for “third-party posts” [read: user generated content] on company blogs and social profiles.

The FINRA social media task force does, however, recommend the adoption of best practices that include:

  • establishing appropriate usage guidelines for customers and other third parties that are permitted to post on firm-sponsored Web sites;
  • establishing processes for screening third-party content based on the expected usage and frequency of third-party posts
  • disclosing firm policies regarding its responsibility for third-party posts

Download the full PDF of FINRA’s new guidelines for social media sites.

The best practices here definitely seem reasonable for company-owned media like blogs and online communities.

What do you think of FINRA’s new rules? A step in the right direction? Dangerous for member companies or consumers?

Or, are policies that encourage supervision and archiving enough to keep companies from engaging in social media in a real and genuine way?

I’m interested to know how others feel about this kind of oversight.

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Image of Everett Rogers’ Diffusion of Innovations theory courtesy of Wesley Fryer

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{ 6 comments… read them below or add one }

January 31, 2010 Chad Bockius 1

Firms interested in learning more should check out the Companion Guide to FINRA Social Networking Compliance It picks up where Notice 10-06 leaves off, offering additional detail on social networking considerations and a checklist of requirements for choosing a social networking compliance vendor.


February 4, 2010 Shannon Paul 2

Thanks for the resource, Chad – I’ll check it out :)


January 31, 2010 Tim Bursch 3

I worked in the financial services business and we jokingly called compliance, business prevention. The reality of regulation makes sense when there are people like Madoff and others that mislead and misrepresent. It was a necessary restriction on marketing.

I’m no longer in those trenches, but this does seem like progress. I remember email being filtered and disclaimers on voicemails. I pretty much had to get permission if it smelled like marketing or advice. So, for friends still in the business that want to be on social networks this seems like a win. Not every tweet or update is marketing (I hope!). It could be a conversation, which leads to a meeting, etc.

I think this new guideline recognizes that social media is here to stay, but I’m not sure it’s mainstream yet. Still know people that don’t know what a blog is or Tweeter. But hey, what’s mainstream?


February 1, 2010 Zack 4

Good post, Shannon. Agreed that FINRA’s “relaxing” the rules may point to increased social media adoption by financial pros but it’s still a highly regulated industry and at the end of the day, these are all still rules — enacted to protect account holders and frequently stifling for business.


February 4, 2010 Shannon Paul 5

Thanks so much for the comment, Zack. Protecting consumers is definitely important, but I don’t always think that communication barriers between businesses and the public do just that. There are so many rumors and myths that are allowed to spread simply because businesses don’t participate in direct conversations. Social media offers a pretty quick way to cut through some of the misinformation, but the fears around direct engagement need to soften up a bit. On the other hand, there are unscrupulous people who often give an entire industry or practice a bad name. I think it’s necessary to move the line of demarcation, but not remove it entirely.

I’m so glad you stopped by — I’m enjoying your blog very much!


February 1, 2010 Pat Allen 6

Shannon, as a former director of marketing communications for FINRA-regulated entities and now digital marketing consultant to the asset management industry, I think the FINRA guidance is the right-size step forward. It opens the window for investment companies to begin thinking about the possibilities of social media. Without such a green-light from FINRA, many investment marketers have had no reason to believe that social media was something that they could consider. Now they can focus on what other industries are already reaping the benefits of.

While supervision and archiving requirements may be streamlined at some point in the future, we don’t see them going away. But we think the guidance is just enough for regulated companies to begin listening, learning more about their clients and prospects and slowly engaging. Will the level of engagement be comparable to Zappos or Starbucks? Not now and maybe never. But watch for investment brands to become more relevant and connected.

Far from representing a threat to the member companies and consumers, the FINRA guidance enables transparency. The days of publishing investment commentary just four times a year and portfolio manager interviews in semi-annual shareholder reports are over. Investors and financial advisors want and need more frequent, consistent information about how their money is being managed.

Social media channels can support ongoing communications, as more than a dozen investment managers are experiencing with Twitter (see the Twitter list we maintain of investment managers on Twitter The next frontier for these early adopters is to master, as supported by internal systems, two-way conversations.


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  • FINRA Issues New Social Media Guidelines :PRBreakfastClub February 4, 2010
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