FINRA Forms Social Networking Task Force

Rick Ketchum, chairman and CEO of the Financial Industry Regulatory Authority (FINRA), said the agency has formed a task force to examine how regulation can welcome new forms of communications while protecting investors.

Speaking at the annual meeting of the Securities Industry and Financial Markets Association (SIFMA), Ketchum said the phenomenon of social networking is an example of new technologies that challenge abilities to ensure compliance with regulatory requirements. While social networking sites such as Facebook and LinkedIn provide new ways to inform and interact with broker/dealer customers, they also raise regulatory challenges. For instance, he noted that it is difficult for firms to archive social-networking communications.

FINRA has previously not released formal guidance about social networking, but has produced a podcast to help broker/dealers and registered representatives interpret rules in regards to social networking (see “FINRA, SEC Rules for Social Networking”). Ketchum said the new Social Networking Task Force is composed of industry participants “to explore how regulation can embrace technological advancements in ways that improve the flow of information between firms and their customers—without compromising investor protection.”

“Many registered representatives, particularly younger ones, want to use social networking sites to communicate with friends and potential customers,” said Ketchum, according to the speech transcript. “As currently constructed, these sites would not permit you to easily supervise these communications. For that reason, most firms prohibit their employees from using these sites for their business. Nevertheless, interest in these sites will not go unabated. Overcoming many of these challenges will require technology solutions. In fact, we are aware of new technologies that may soon enable firms to archive employee communications in order to comply with supervision and recordkeeping requirements.”