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Which is better, static content or interactive content? This depends on your goals. Interactive content – comment sections of a blog, tweets, and live chats, for example – keeps clients and potential investors engaged and may be useful in client servicing, a topic discussed later. And if reps are creating or sharing posts about useful or interesting subjects, their followers are more likely to share that content themselves. In addition to spreading the rep's name and presence around the social media universe, it could possibly increase search engine rankings – making it easier for a potential client to find the rep during an Internet search.

It helps to remember that when it comes to static content versus Interactive content, anti-fraud rules and the standard for negligent misstatements and omissions apply to both. Advisors need to think carefully about what they're putting out on social media – even tweets, which are short and to the point, carry compliance responsibilities. Always keep in mind that if you wouldn't say it offline, don't say it online.


Following the enactment of new rules related to electronic communications and boosting social media and electronic communications as a priority in exams, FINRA then took another step: conducting a sweep to determine compliance with its social media rules.

In the Target Examination Letter, FINRA said that firms will be subject to periodic spot-checks.[1]

Charles Schwab's Melissa Callison, who serves on FINRA's Social Media Task Force, says the sweeps were part of a gut check to see if firms were applying the guidance from FINRA RN 10-06 (2010) and RN 11-39[2] (2011) and to determine if firms had implemented reasonable supervisory processes (for example, are they performing the same procedures in light of the guidance) and recordkeeping practices. The spot-check results indicated that recordkeeping continues to be a pain point for firms, and there will continue to be dialog and follow-up calls with the industry, which may lead to additional regulatory guidance on the topic.

Most interestingly among the list of items FINRA reviewed was a firm's top 20 producing advisors – based on commissions – who have used social media for business purposes. One theory for the focus may have been to see if top producers were using social media and how that correlated to commissions earned on those activities. This target is less an issue for firms that do not employ commission-based advisors than for those that do.

Should advisors be concerned? In our interview, Callison, like others, says “social media for advisors is a great opportunity to connect with clients and get their name out.” But still, many are discouraged by FINRA regulations, which they feel make it difficult to be able to communicate as freely as they want. What can advisors do?

Here are a few tips:

Conduct Your Own Spot Checks – As a best practice for your own firm, use an examination or sweep – whether it's a spot check or an examiner visit – to move proactively to review your policies and procedures. Make sure they're updated.

Schwab, for instance, has implemented its own spot-check process because it found its own internal inconsistencies. “Because this space is so interactive and dynamic, it's tough to follow a process with social media. You need to be constantly checking in, updating your procedures, making sure your supervision is working, and seeing if your needs have changed,” Callison says.

Watch Your Third-Party Providers – On the record-keeping front, a lot of firms use third-party providers who say they'll handle all your supervision and archiving. So, as part of a spot check, FINRA could look at what they're actually archiving. Make sure you've conducted a thorough check yourself to avoid a third-party provider saying they're doing one thing – like maintaining posts on Facebook, tweets on Twitter, or shares on LinkedIn – but actually not.

Be Aware of Ownership – In some cases, the third-party social media site may actually own the information on that site – such as a tweet. Moreover, sites like Facebook may change their APIs – the code allowing a firm to interface and capture information nightly – which could suddenly shut a firm out. Options for this, suggests Callison, include having a close relationship with these platforms and/or having paper backups.

If FINRA decides to conduct another spot check related to social media, it's expected to be looking more for violations or for firms that failed to put into place the right mechanisms, rather than simply looking for levels of consistency across firms and business models.

FINRA told the brokerages it wanted:

■ An explanation of how each firm was using social media (e.g., Facebook, Twitter, LinkedIn, blogs) at the corporate level in the conduct of its business. It also sought:

■ The URL for each of the social media sites used by the firm at the corporate level.

■ The date the firm began using each of the sites identified.

■ The identity of all individuals who posted and/or updated content of the sites.

■ An explanation of how the firm's registered representatives and associated persons generally used social media in the conduct of the firm's business, including the date(s) the firm began allowing the use of each social media platform and whether the usage continued.

■ The portion of the firm's written supervisory procedures concerning the production, approval, and distribution of social media communications in effect during February 4, 2013 through May 4, 2013.

■ An explanation of the measures that the firm adopted to monitor compliance with the firm's social media policies (e.g., training meetings, annual certification, technology).

■ A list of the firm's top 20 producing registered representatives (based on commissioned sales) who used social media for business purposes to interact with retail investors as defined in FINRA Rule 2210(a)(6) during the specified time period. It also wanted to know the type of social media used by each rep for business purposes during this time period, as well as the dollar amount of sales made and commissions earned during the period.

  • [1] “Re: Spot-Check of Social Media Communications,” FINRA Targeted Examination Letters, June 2013, ExaminationLetters/P282569. Accessed June 8, 2014.
  • [2] “Regulatory Notice 11-39: Social Media Web Sites and the Use of Personal Devices for Business Communications,” FINRA, August 2011, Accessed June 8, 2014.
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