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Brokerage cop busts out big gun: How to beat FINRA to the next social media punch


On Monday, news broke that former congressman Michael Oxley of 2002’s Sarbanes-Oxley fame has registered as a lobbyist for the Financial Industry Regulatory Authority (FINRA). Why should financial professionals and social media business gurus care? Because this move confirms that FINRA is in it to win it—the power to police the online communications of financial advisers, that is. Soon FINRA’s rules on social media may apply to all financial advisers, not just the registered representatives of broker-dealers.

In January 2010, FINRA catapulted into the social media scene when it released Notice 10-06, a guide on how to interpret securities regulations on communications with the public in the context of social media. Since its inception in 2007, FINRA’s jurisdiction has begun and ended with registered representatives (agents of broker-dealers who execute securities trades on behalf of their customers or firms). FINRA, an independent self-regulatory organization (SRO), currently oversees more than 4,500 brokerage firms.

In January 2011, Congress began to evaluate the Securities and Exchange Commission’s (SEC) track record of overseeing financial advisrs as a result of the Dodd-Frank Investment and Consumer Protection Act. Since then, we’ve been following FINRA’s fight to take on more of the SEC’s investigatory duties. The SEC, overwhelmed with the growing investment advisor industry, seems to be on board with delegating adviser oversight to an SRO. Critics such as JPMorgan argue that a broker-dealer cop like FINRA can’t monitor investment adviser practices fairly and efficiently.FINRA authority over investment advisers would be a game-changer in the emerging world of social media for financial firms. Not only would firms need to monitor, archive, and perhaps even pre-approve the social media communications of broker-dealers, but also of investment advisers.
If you’re a firm with brokerage and/or investment arms, you may be ready to throw in the towel on social media despite its proven benefits to engage your clients and prospects on a meaningful level.
Instead, why not preempt the expected expansion of FINRA oversight to save your firm time and money? If you’re like many financial firms, this year’s goal is to write and roll out a social media policy that approves, monitors, and archives your broker-dealers’ communications with the public. If you act with speed and foresight, you should be able to use that same policy and platform for your investment advisers. Make sure to choose a software platform that can perform compliance functions for multiple divisions of your company (e.g. retail banking or insurance as well as investment advising or brokerage) at both the corporate and branch levels.