August 27, 2009
--- Many financial advisers and brokers might be confused about what regulators have to say about using social networking. ---
That’s because they have not said a whole lot. However, it’s obvious regulators are at least aware of social networking; both the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) send updates on Twitter.
From a broad standpoint, FINRA and the SEC place using social networking tools (such as Facebook, Twitter, and LinkedIn) under advertising and communication rules.
Earlier this year, FINRA offered some guidance to broker/dealers and their registered representatives in a podcast series about electronic communication, and one podcast dealt specifically with using social networking.
The SEC requires a little more interpretation for investment advisers, noted Dan Bernstein, director of professional services at MarketCounsel. The Commission has advertising rules under the Investment Advisers Act of 1940, but has not spoken to the issue of social networking specifically, he told PLANADVISER.com (see "Walking A Fine Line").
The SEC would take the position that advertising is advertising regardless of the medium, said Steve Scholes, partner at the law firm McDermott Will & Emery. The problem could arise in which an employee of a firm does not think communication is advertising but it is seen as advertising to an SEC enforcement lawyer.