Preparing for a FINRA Spot Check: Three Simple Steps to Social Compliance | Lord Abbett
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Practice Management

Your clients' overall level of happiness with you is central to your ability to fend off competitors and grow your business successfully.

This Practice Management article is intended for financial advisors only (registered representatives of broker dealers or associated persons of Registered Investment Advisors).

The Financial Industry Regulatory Authority (FINRA) announced in June 2013 that it is conducting spot checks on social media communications, such as Facebook, Twitter, LinkedIn, and blogs.

With FINRA clearly stating its social media guidelines, the question many advisors are asking themselves is this: what do I do now? Fortunately, there are three simple steps to avoiding regulatory fines and keeping your advisors actively online.

Step 1: Establish a Strong Social Media Policy
This is where having a strong social media policy comes into play. Your policy should stand as a living document for your firm, continuously evolving as industry regulations and technology change. A firm’s policy should clearly outline the goals it wishes to accomplish on social media, who is allowed to participate in online activities on behalf of the firm, and which social media platforms are aligned with its business goals. That way, if a spot check were to occur, firms can easily explain what platforms advisors are using and why.

By taking the time to discuss the firm’s online strategy, compliance priorities, and social media best practices, advisors can avoid regulatory hurdles in the long run and set their businesses on the path to a strong, successful, and, most important, compliant social media presence.

Step 2: Continuous Training
Before advisors start building engagement online, they must be trained on social media best practices. Discuss social media dos and don’ts regarding what should be mentioned online, how they should conduct business on social media, and what forms of content are permissible according to the firm social media policy.

Step 3: Archive All Social Media Activity
Think of social media archiving as your compliance safety net. Archiving solutions, such as RegEd Archiving and Surveillance, capture all social media activity for the advisors within a firm, including platform URLs, posts, and updates. In addition, all online engagement is time stamped within the archives—a convenient feature should a spot check occur.

For financial professionals, compliance is the number-one priority when online. Even if advisors are following the guidelines outlined in their policies and demonstrating the best practices learned during training, archiving is still a must in order to ensure compliance with FINRA regulations.

According to FINRA Rule 2210(c)(6), each firm’s written (including electronic) communications are subject to a periodic spot-check procedure. FINRA’s Advertising Regulation Department requests that firms provide the following:

  • An explanation of how the firm is currently using social media (e.g., Facebook, Twitter, LinkedIn, blogs) at the corporate level in the conduct of its business. Please be specific as to the business purpose of each social media platform as it is used by the firm.
  • Please provide the following with respect to the firm: 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 above; and the identity of all individuals who post and/or update content of the sites identified above.
  • An explanation of how the firm’s registered representatives and associated persons generally use 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 such usage continues.
  • The portion of your firm’s written supervisory procedures concerning the production, approval and distribution of social media communications in effect during the time period February 4, 2013, through May 4, 2013.
  • An explanation of the measures that your firm has adopted to monitor compliance with the firm’s social media policies (e.g., training meetings, annual certification, technology).
  • A tabular list of your 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 time period February 4, 2013, through May 4, 2013. Please identify the type of social media used by each individual for business purposes during this time period. Please include the individual’s full name and CRD number as well as the dollar amounts of sales made and commissions earned during the period.

Caitlin Zucal is marketing coordinator for RegEd and manages the company’s social media presence.


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