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FINRA Releases New Guidance on Social Media and Text Messaging Communications

April 28, 2017

Regulatory Notice 17-18 provides additional guidance on business text messaging and rules that affect social media

The long awaited additional FINRA guidance on social media and digital communications (especially regarding text messaging) was recently published via Regulatory Notice 17-18. Here is a summary of the guidance and what it means for financial services firms.

New Guidance on Text Messaging

According to FINRA’s new notice, if your firm “ … intends to communicate, or permits its associated persons, to communicate, with regard to its business” via text messaging, “it must first ensure that it can retain records of those communications as required by SEA Rules 17-a3 and 17a-4 and FINRA Rule 4511.”

There are several important complexities here. FINRA specifically says if your firm “intends” to communicate, then it should first have record retention in place; however, it is unclear how “intend” is interpreted. For that reason, if your firm is in executive discussions regarding text messaging, then it should be thinking about having the proper compliance tools in place for supervision and record-keeping of texts.

Another gray area is the difference between what makes something a personal communication versus a business communication. Are there topics which advisors can communicate with clients that are not deemed as business communication under FINRA rules? FINRA states that the content of the communication determines what must be retained. As such, a firm would not be able to decipher what is or isn’t considered business communications unless it has clear policies and technology in place that can help clarify such complexity.

Tools such as Hearsay Messages provide a separate phone number or the advisor’s land line to be used for business communications. This ensures a clear distinction between personal and business communication, and ensures the advisor’s non-business texts will not be captured by the firm.

Managing advisor texting by company policy or mandate alone is no longer sufficient, because the chance of non-compliance remains high. Firms need to leverage technology for compliance and supervision, as well as for record-keeping, of business-related text communications.

New Guidance on Social Media and Firm Websites: Testimonials and Endorsements

The good news here is that FINRA now states it does not regard unsolicited third-party comments on social media to be a testimonial. But advisors should not like or share such favorable comments. Should they do so, then they have “adopted” the comments as their own.

However, RIAs should still adhere to SEC Rule 206(4), which prohibits promotion of client testimonials and endorsements. The SEC-issued Guidance No. 2014-4 – Guidance on the Testimonial Rule and Social Media – states that investment advisors should not invite their clients to post commentary directly on their own social media site or website. But if they receive unsolicited comments on their social media profile, then they are not responsible for it. Still, a prominently placed disclaimer in the summary section of a rep’s profile, to avoid entanglement with a client’s comments, is prudent.

Below is a diagram from Hearsay to help firms navigate third-party links for social media and firm websites:


Disclaimer: The material available on this blog is for informational purposes only and not for the purpose of providing legal advice. We make no guarantees on the accuracy of the information provided herein.


Yasmin Zarabi

Vice President, Legal and Compliance

Yasmin is responsible for Hearsay's legal affairs including commercial, compliance, regulatory and privacy matters. She is a thought leader in compliance for financial services, has been published in industry press and speaks at events around the world.

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