FINRA Issues Regulatory Notice 11-39: Social Media Websites and the Use of Personal Devices for Business Communications

In August 2011, FINRA, the self-regulatory agency of the securities industry, issued Regulatory Notice 11-39, offering additional guidance concerning the use of social media and supplementing its first notice on the subject—Regulatory Notice 10-06, issued in January 2010. Notice 11-39 focuses on issues relating to FINRA members’ use of social media, including record-keeping, supervision and responding to third-party posts and links. The Notice includes 14 “Q&As,” which provide instruction on the practical application of a firm’s and “associated person’s” (i.e., FINRA members) obligations under applicable laws and regulations when it comes to social media. With respect to record-keeping requirements, social media websites raise new complications because member firms do not themselves typically sponsor or host the content on those websites. The Notice, however, clarifies that record retention requirements continue to apply to content on social media sites and that the controlling question is whether the communications on those sites relate to the firm’s “business as such.” Any business communication made via Facebook, for example, must be “retained, retrievable and supervised.”

Firms are also required to supervise the content of associated persons’ social media websites, including conducting “appropriate training and education concerning [the firm’s] policies,” and must follow up on “‘red flags’ that may indicate that an associated person is not complying with firm policies.” The Notice states that many firms have chosen to require associated persons to certify on an annual (or more frequent) basis that they are complying with firm policies and perform spot checks on associated persons’ social media sites to monitor compliance. (An earlier post on Gibbons E-Discovery Law Alert addressing social media policies generally can be found here.)

Third-party posts and links on social media sites raise additional concerns for FINRA members. The Notice provides that associated persons may respond to a third-party’s business-related inquiry on a personal social media site, such as a question about a particular security, as long as the response does not violate the firm’s policies concerning such communications and the firm takes appropriate steps to retain that communication. According to the Notice, many firms require associated persons to provide only a non-substantive response on the social media site, directing the person with an inquiry to firm-approved communication channels, such as the firm’s email system.

In sum, Notice 11-39 does not alter the existing rules concerning communications between member firms and associated persons on the one hand, and their clients and the general public on the other, but serves to acknowledge the difficulties in applying the traditional rules in the social media context. The Notice recognizes that the general rules regarding firms’ supervision and retention of business-related communications are complicated where certain communications no longer take place in hard copy or even on firm-provided devices or websites, but seeks to instruct members that these rules apply nonetheless and provides guidance on how members can continue to comply.

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