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Live from FINRA Ad Conference: FINRA Rule 2210 is coming

This morning Kevin Eversen and I attended the General Session of the FINRA Advertising Regulation Conference in Washington, DC.
Panelists included Tom Pappas (VP of Advertising Regulation at FINRA and co-author of the regulatory notices on social media 10-06 and 11-39), Tom Selman (EVP of Regulatory Policy), Joe Price (SVP Corporate Financing/Advertising and co-author of the Notices 10-06 and 11-39), and Joe Savage (VP Investment Companies Regulation).
The session kicked off with some interesting stats related to the conference and social media:

  • 470 paid attendees.
  • Entire FINRA advertising staff is here.
  • Social media is the topic that received the most attention for the second year in a row.
  • In addition to Day 2 General Session, the Nuts and Bolts panel will have info on social media/electronic communications. (Stay tuned!)
  • New panel added on how marketing and compliance departments can work together. (Content will likely mirror the WOMMA conference at which I’ll be speaking later this year.)
  • Due to demand, increased number of social media vendors this year.

The panel then transitioned to updates on the consolidation of NASD and NYSE Communications Rules, which we reported in a Financial Advisor Magazine article last month. As a result of the Dodd Frank Consumer Protection Act, deadlines have been imposed on the SEC to pass rules more quickly.
The big news is that the SEC is expected to pass FINRA Rule 2210 next week, which will combine NASD Rule 2210 and 2211 and their interpretive materials. The new rule lays out an exception to the preapproval requirement for social media: firms and reps will not need to have a principal approve the content of a status update, post, or tweet prior to it being posted on an online interactive forum such as a LinkedIn/Twitter feed or Facebook Wall. This rule change would essentially codify the positions laid out in Regulatory Notice 11-39.
Notably, yesterday Morgan Stanley Smith Barney’s Director of Social Media, Lauren Boyle, and Socialware’s Chad Bockius discussed their take on FINRA Rule 2210 in a webinar.
Boyle was quoted as saying, “’We consider every tweet to be static content requiring preapproval at this point.”
Today, FINRA disagreed with that analysis: the panelists went on record to confirm that tweets and posts are indeed not considered static content under 11-39 and therefore need not be preapproved. Many thanks to FINRA for definitively answering the question we’ve been asking. (Find our analysis on this from the recent CEFLI/NAIC/FINRA social media forum here.)
Hearsay Social has the workflow technology to route and timestamp the approval of each and every post should a customer want to keep tighter controls on their advisors than is necessary under FINRA’s rules. Preapproval of both static and interactive social media communications, however, requires tons of resources and a huge time commitment from firm principals and the compliance department. Such a policy would make widespread adoption by reps and advisors less likely and detracts from the timeliness of posts (and ultimately the business value that social media networks can provide). With FINRA’s clarification today, it is unlikely that many other firms will require that posts and tweets be preapproved.
More on the social media panel coming tomorrow.

Kevin Eversen and Ally Basak Russell at the FINRA Advertising Regulation Conference