David Chung, ING Presentation - BDI 4/14/11 Financial Services Social Communications Leadership Forum
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The document outlines the regulatory requirements for social media use in the investment industry, emphasizing the importance of compliance with FINRA rules. It discusses record-keeping responsibilities, suitability issues, and best practices for social media engagement while providing guidance on collaboration with legal and compliance departments. Additionally, it highlights the need for supervision and training to ensure adherence to regulations.
![Recordkeeping Requirements
• What records are required to be kept in social media activities?
• Static Postings
• Discussion threads
• Third Party Postings
• For FINRA member broker dealers:
• 3 years with the last 2 years in an easily accessible place.
[FINRA Rule 2210 (b)(2)(A) and 3110]
• For SEC registered investment advisors:
• 5 years with the last 2 years in an easily accessible place.
[SEC Rule 17a-3 and 17a-4 of the ‘34 Act]
• Regulators do not endorse any particular record keeping technology or
vendor, nor acknowledges that there are adequate technology that exists.
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![Compliance Resources
1. FINRA Regulatory Notice 10-06
Social Media Web Sites
[http://www.finra.org/Industry/Regulation/Notices/2010/P120760]
2. FINRA Regulatory Notice 01-23
Online Suitability
[http://www.finra.org/Industry/Regulation/Notices/2001/P003886]
3. FINRA Regulatory Notice 07-59
Supervision of Electronic Communications
[http://www.finra.org/Industry/Regulation/Notices/2007/P037554]
4. FINRA Advertising Compliance Resource
[http://www.finra.org/Industry/Issues/Advertising/]
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David Chung, ING Presentation - BDI 4/14/11 Financial Services Social Communications Leadership Forum
- 1. The Rules of the Road Navigating the Social Networking Regulatory Requirements in the Investment Industry Presented by: David K.V. Chung Senior Compliance Officer – Sales and Marketing Practices Compliance Legal & Compliance Department ING Investment Management – Americas April 14, 2011
- 2. Introduction 1. Background 2. Regulations – Rules can be both complicated and vague 3. Best Practices – Operate within the rules 4. Teamwork – Working with your Legal and Compliance Department 5. Resources Important Note: Unless stated otherwise, the ideas expressed are solely the opinions of the presenter and do not necessarily represent the opinions of ING Investment Management or its affiliated firms. In addition, the information provided should not be construed as legal advice, please consult your legal counsel before making any policy decisions. 2
- 3. FINRA Regulatory Notice 10-06 • The Financial Industry Regulatory Authority (FINRA) provided it’s first high level industry guidance for social media activities for investment broker dealer firms. • It provided no specific rule changes, but offered clarification in a Q & A format. Summary Highlights • Record Keeping Responsibilities • Suitability Responsibilities • Types of Interactive Electronic Forums • Supervision of Social Media Sites • Third Party Posts Source: FINRA NTM 10-06 3
- 4. FINRA Classification of Social Networking Activities Is it a Public Appearance, Advertisement or Correspondence? Well, it depends… • Public Appearances are unscripted participation in an interactive forum such as a chat room or online seminar. • Advertisements are the static written content available for access online. This includes the static content on a blog, FaceBook profile, Twitter profile and LinkedIn profile. Profile includes any background or wall information posted. • Correspondence would be email communications that are sent one-on- one through the email system of social media sites. • The different classifications affect whether or not it requires Registered Principal pre-approval, post-monitoring or possible marketing filings with FINRA. Source: FINRA NTM 10-06 4
- 5. Investment Suitability Issues • What constitutes as a stock “recommendation”? • Firms are responsible for their social media messages and are not exempt from suitability requirements and are liable for non-compliance. • Facts and circumstances of the communication determines whether or not a recommendation was made. • Rule 2310 – Did the author have reasonable grounds to make such a recommendation based on the reader’s financial situation and needs? • What investment-related advice can be provided online? • Access to a library of equity research reports. • Online tools to indentify an investors risk tolerance. • Online tools to assist investors with general retirement planning tools and calculators. • Stock screeners based on parameters established by the user. • Opted-in online communications that notifies the user of a pre-scheduled event. Source: FINRA NTM 01-23 5
- 6. Supervision and Monitoring • Firms must establish policies that are reasonably designed to ensure their social media activities do not violate general rules outlined in Regulatory Notice 07-59. General Requirements 1. Written Policy and Procedures that are disseminated throughout the firm. 2. Identify what types of communications require review. 3. Identify which person(s) are responsible for supervision. This should include business employees because certain functions may be performed by non-compliance employees. 4. Outline the method of review. 5. Frequency of the review. 6. Documentation that reviews were carried out. • Conduct compliance training. • Identify how complaints are handled. • Identify which employees have access to social media sites via the firm’s network. • Continually evaluate social media activities for compliance. Source: FINRA NTM 07-59 6
- 7. Recordkeeping Requirements • What records are required to be kept in social media activities? • Static Postings • Discussion threads • Third Party Postings • For FINRA member broker dealers: • 3 years with the last 2 years in an easily accessible place. [FINRA Rule 2210 (b)(2)(A) and 3110] • For SEC registered investment advisors: • 5 years with the last 2 years in an easily accessible place. [SEC Rule 17a-3 and 17a-4 of the ‘34 Act] • Regulators do not endorse any particular record keeping technology or vendor, nor acknowledges that there are adequate technology that exists. 7
- 8. Best Practices Dos • Discuss macro economic concepts. • Discuss various sectors or industries. • Discuss retirement concepts. • Educate the public on financial markets and products. • Post company non-product or services related announcements. • Post messages that have a broad appeal. (i.e., charity events or good will activities) • Post generic responses to third-party postings. Don’ts • Don’t mention a name of a stock. • Don’t provide investment advice. • Don’t promote your products and services. • Don’t make provocative or promissory statements regarding the direction of the markets or prices of commodities. • No re-tweets on Twitter. • No unauthorized employee postings. 8
- 9. Working with your Legal & Compliance Department Don’t assume your legal or compliance colleagues… 1. …“get it” or immediately think it’s a cool idea. 2. …understands social media concepts or even likes it. 3. …understands your social media business plans. 4. …are fully versed in social media regulations. Do: 1. Educate them on social networking sites. Start with the bare basics! 2. Provide them with a comfort level with the technology. 3. Provide them with articles and research related to social media compliance. 4. Inform them what your competitors are doing in this space. 5. Invite the I.T. department to be part of the conversation. 6. Request to a pilot project to test the waters. 9
- 10. Compliance Resources 1. FINRA Regulatory Notice 10-06 Social Media Web Sites [http://www.finra.org/Industry/Regulation/Notices/2010/P120760] 2. FINRA Regulatory Notice 01-23 Online Suitability [http://www.finra.org/Industry/Regulation/Notices/2001/P003886] 3. FINRA Regulatory Notice 07-59 Supervision of Electronic Communications [http://www.finra.org/Industry/Regulation/Notices/2007/P037554] 4. FINRA Advertising Compliance Resource [http://www.finra.org/Industry/Issues/Advertising/] 10