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New FINRA Guidance Affects Broker Dealer Communication Rules

Post on: May 16, 2017 | Chris Rohde | 0


In April, the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization that governs broker-dealers like WealthForge Securities, issued new guidance on the application of its rules to social media and other digital communications. Broker-dealers should take a close look at this notice as the Staff’s guidance will affect how they are conducting themselves online. FINRA’s staff focuses their concerns on native advertising, social media, and electronic communication such as text messaging or other messaging applications.

Previously, FINRA has provided some guidance around social media and digital communications that frames these new comments. First, FINRA has stated that third-party posts on the broker-dealer or representative’s social media page are not communications with the public under FINRA Rule 2210, unless the broker, or representative, paid for the content, or explicitly, or implicitly, endorsed or approved the content.[1] Additionally, FINRA stated in Regulatory Notice 11-39 that firms may not establish a link to a website that the firm knows contains false or misleading content.[2]

Digital Communication

Concerning digital communication, the Staff has previously clarified that the content of the communication, not the device used, determines whether it must be retained under SEA Rule 17a-4(b). This is an important concept to understand—if the content is not related to securities business, i.e. personal text messages or a non-business social media page, then it need not be retained, but if it pertains to the sale of securities, then the broker must retain a copy of that communication for three years.

The Staff confirmed this position in the new notice, but also specifically states that a firm must ensure it can retain records of those communications before it allows an associated person to use applications such as text messaging or other chat services. It is clear from both current and past guidance that FINRA continues to focus on ensuring that Firms are capturing all securities related communications sent by their associated persons.


The Staff also drew attention to the use and sharing of hyperlinks. The concern is what material from the site being linked to does the firm adopt. The Notice states that a firm adopts any specific content to which it links, such as a video or article. As a result, a broker-dealer must ensure that, in context, the content complies with Rule 2210, however, if the webpage contains links to other websites or content that is not under the firm’s control, it has not adopted that material and has no responsibility for that content. There are exceptions to this of course. For example, if the firm does have control or influence over those third-party links or the content that the firm links to, then the firm does pick up the responsibility for the additional content.

In determining whether a firm adopted the content when it linked to a section of an independent third-party website, FINRA states that it reviews two factors: (1) whether the link is “ongoing” and (2) whether the firm has influence or control over the content of the third-party site. “Ongoing” effectively means that the link is continuously available—and is available whether or not the content is positive for the broker-dealer. If the link is ongoing, then the firm has not adopted the content, but if the firm has control or influence over the content, they will become associated with that content.

Based on this guidance, broker-dealers should be extremely careful when it comes to linking to another website or content. This likely means that broker-dealers should review any websites or content to which they plan to link prior to authorizing such a link. Failure to be sure as to what content you are linking to could potentially lead to adopting content that is in violation of FINRA communication rules.

Native Advertising

In 17-18, FINRA focuses some attention on native advertising. Native advertising is defined in the regulatory notice as “content that bears a similarity to the news, feature articles, product reviews, entertainment and other material that surrounds it online.” As this is a newer advertising model, at least to FINRA, the Staff is applying its rules to a new area. First, the Staff requires that a firm disclose its name, reflect accurately any relationship between the firm and anyone named in the advertising, and whether any products mentioned in the advertisement are offered by the firm. Second, the Staff makes clear that arranging posts by individuals or influencers entangles the firm with that content, meaning the content must meet the requirements of FINRA Rule 2210. As a result, broker-dealers and their representatives should be extremely cautious in the use of native advertising. Additionally, these restrictions need to be addressed with issuer clients prior to an offering's availability for subscription. An issuer may not consider native advertising true advertising and may not think to get approval from their broker-dealer prior to use. Such a mistake could have dire consequences for both the broker-dealer, due to violation of the advertising rules, and issuers, since a broker-dealer may have to take the offering down, reject investors who viewed the advertising, or allow the offering to cool down prior to accepting new investors.


The Staff also clarifies how the testimonial rules in 2210(d)(6) apply to posts on social media websites. For example, an unsolicited comment or opinion posted on a registered individual’s social media profile that is supervised by the firm is not considered to be communications of the broker-dealer. But, if the representative likes or shares those comments, then he has adopted them and the communications rules apply to those comments. Ultimately, this means these comments may not be misleading or incomplete, and must meet the requirements of the testimonial rules of 2210(d)(6), including the standard testimonial disclosure.

Correction of Third Party Content      

Regulatory Notice 17-18 does clarify that making a factual correction to an online directory of business by either contacting the publisher or making a comment does not make that correction a communication of the Firm.


The Staff also clarified in this notice that an app from the broker-dealer need not include the link to BrokerCheck required by Regulatory Notice 15-50 unless the app accesses and displays a webpage on the firm’s website. If the app does access such a page then the link must be readily apparent. The real takeaway from this comment is to ensure the BrokerCheck shows up on your website when it is viewed from an app browser.

Regulatory Notice 17-18 primarily serves to put firms on notice as to how FINRA’s rules around communications with the public apply to certain digital communications, advertising, and social media. All broker-dealers should review this notice to ensure their policies around communications with the public, social media, and digital communications are in compliance with FINRA’s guidance.


[1] Regulatory Notice 10-0

[2] Regulatory Notice 11-39


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About author

Chris Rohde

Chris serves as Associate Corporate Counsel at WealthForge where he advises on an array of areas, including both federal and state securities laws, broker-dealer law, general corporate law matters, and cybersecurity.
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