FINRA’s Guide to the Internet

FINRA has published a Guide to the Internet for Registered Representatives. It paints a difficult picture for registered representatives wanting to use Web 2.0 tools.

FINRA breaks internet activity into five main group for purposes or regulatory requirements:

  • Publicly available Web sites (including banner advertisements, blogs and bulletin boards) are considered advertisements.
  • An email or instant message sent to 25 or more prospective retail customers is considered sales literature.
  • An email or instant message is considered correspondence if it is sent to i) a single customer (prospective or existing) ii) to an unlimited number of existing retail customers and/or less than 25 prospective retail customers (firm-wide) within a 30 day period.
  • Password-protected Web sites are considered sales literature.
  • Chat room discussions are considered public appearances.

I am not sure all of this is a particularly useful grouping since many of the characteristics are shared across the groups. For instance how does a chat room differ from comments on a blog. How does an RSS feed differ from an email to 25 or more prospective customers? But FINRA does acknowledge that “a member firm’s obligations to supervise electronic communications are based on the content and audience of the message, rather than the electronic form of the communication.”  [FINRA Regulatory Notice 07-59 (.pdf) on the Supervision of Electronic Communication. ]

Given that many of the Web 2.0 tools are communications with the public, you should look at FINRA Rule 2210 Communications with the Public. The rules are major impediment to the use of Web 2.0


8 Responses to FINRA’s Guide to the Internet

  1. Bill Winterberg March 25, 2009 at 1:28 pm #

    The best thing a registered rep can do is save and retain all publicly available information posted through Internet tools, including websites, blogs, RSS feeds, and social media posts (Twitter, LinkedIn, etc.).

    Perhaps saving month-by-month RSS feed data for all sources and burning onto WORM devices will suffice. Seems overkill, but I think that adheres to the letter of the law.

    • Doug Cornelius March 25, 2009 at 1:40 pm #

      The big problem is that advertisements mus be approved in writing prior to use. Approval and Recordkeeping (Rule 2210(b)) And then you need to file them with FINRA. That process is hard to do for blog posts, comments on other blogs, Tweets and other web 2.0 publications. Any of those could be considered advertisements.

      The FINRA podcasts on the topic March 10, 2009 and Februaru 23, 2009 provide no help.

  2. Brian Byrne December 17, 2009 at 12:37 pm #

    I have just announced a new social media site, that addresses FINRA compliance issues such as document retention. It was built specifically for financial adivsors and will allow FA’s to leverage social networking to do more business, win more investors and enhance their professionalism in the eyes of investors and prospects.


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