Tweet away: Finra backs off social-media posting regs
December 30, 2011 by Dan Jamieson
Burden of vetting posts cited, victory for securities
industry
By Dan Jamieson
December 30, 2011
The Financial Industry Regulatory Authority Inc. has backed away from a
proposal that would have required broker-dealers to file social-media postings
with the regulator.
In an update to a package of proposed communications rules filed with the
Securities and Exchange Commission last week, Finra said that in response to
comments, it would exclude messages on online interactive forums from a post-use
filing requirement.
The securities industry had pushed for the change.
“If every member firm is required to monitor and review all of the online
postings of all of its registered representatives, and every member firm is
required to file those that trigger a filing requirement, the impact upon Finra
is potentially overwhelming,” the Securities Industry and Financial Markets
Association wrote in a comment letter this month.
Finra has been treating interactive posts as “public appearances,” which must
be supervised but do not necessarily have filing requirements.
The self-regulator is proposing to do away with the public-appearance
category of communications, and treat online posts as correspondence.
In proposing the latest changes to its communications rules, Finra said it
disagreed with the argument that online posts are like public appearances
because the posts remain available to the public for an extended period of time.
But Finra said it is nevertheless proposing to exclude them from a filing
requirement.
The oversight of social media has been a tricky area for firms and
regulators, who have struggled to supervise the communications without impeding
spontaneous conversations.
Finra’s proposal should help improve communications to investors, said John
Drachman, founder of The Drachman Group Inc., a marketing consultant.
But he advises financial firms to follow stricter procedures for any
product-specific posts.
“For example, a member forum that addressed the use of managed futures in a
portfolio should be excluded from retail filing requirements,” he said, “while a
member forum that weighed the advantages of one managed futures fund versus
another should continue to file its communications.”