Q&A with Tara LaClair
‘Sweep Letter' focuses on use of social media in financial industry
Q: The Financial Industry Regulatory Authority (FINRA) recently issued a letter requiring financial services firms to do routine spot checks of their social media communications based on its two initial regulatory notices providing guidance to the securities industry on social media communication such as blogs, Facebook, Twitter and LinkedIn. What does this mean?
A: That firms allowing use of social media sites must have written procedures and systems in place that are reasonably designed to ensure compliance with FINRA rules. FINRA also emphasized that firms allowing brokers to use social media sites must review these sites, and the brokers' proposed use of the site, in advance. FINRA also provided examples of what some firms do to comply with their supervisory obligations such as conducting training, including identifying red flags associated with social media usage and random spot checks of websites to monitor compliance with firm policies.
Q: What does the new letter require of these firms?
A: FINRA's “Sweep Letter” seeks an explanation of how its member firms are using social media at the corporate level to conduct business and how brokers generally use social media in their practice. It also seeks written supervisory procedures from firms concerning their production, approval and distribution of social media communication and an explanation of how the firms are monitoring compliance with their policies. The Sweep Letter includes a request for information from the firm's top 20 producing brokers who use social media to interact with retail investors.