Privacy & Information Security Law Blog

On January 25, 2010, the Financial Industry Regulatory Authority (“FINRA”) issued Regulatory Notice 10-06, Guidance on Blogs and Social Networking Web Sites (the “Guidance”) for securities firms, investment advisors and brokers.  FINRA, which is the largest non-governmental financial regulator, previously had issued guidance on other issues pertaining to interactive web sites, such as participation by securities firms and their employees in Internet chat rooms discussing stocks or investments.  The goals of the Guidance are to “ensure that—as the use of social media sites increases over time—investors are protected from false or misleading claims and representations” as well as “to interpret [the] rules in a flexible manner to allow firms to communicate with clients and investors using” blogs and social networking.

The Guidance sets forth important responsibilities for securities firms, including that they should (i) retain records of communications made through social media sites; (ii) consider adopting policies and procedures governing communications that promote specific investment products; (iii) supervise electronic communications in a manner “reasonably designed” to ensure that they do not violate FINRA rules; (iv) prohibit employees from engaging in business communications on social media web sites that are not subject to the firm’s supervision; and (v) screen third-party content on firm-sponsored blogs or social networking web sites.

Although the Guidance is informal and intended to assist securities firms in establishing their own social media policies and procedures, FINRA may eventually codify the Guidance in a formal rule and thereby enable it to enforce compliance and impose fines for any violations of such a rule.