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May 3, 2017

Finra has rolled out another set of guidance notes to help advisors understand how to use social media and texting.

The latest Q&A, which is Finra’s third guidance on social media and digital communications since 2013, clarifies that unsolicited social media comments aren’t testimonials — unless advisors endorse the comments by "liking" or "sharing" them.

Yasmin Zarabi explains in a blog on the website of digital marketing firm Hearsay Systems, that when advisors like or share a comment, they are in effect “adopting” the comments. Once a comment is adopted, it would be subject to existing rules governing communications — such as those rules related to misleading or incomplete statements and record retention.

Zarabi suggests that advisors should include on their social media profile pages a disclaimer on comments. RIAs should still abide by the SEC rule which prohibits them from promoting endorsements or testimonials, she writes.

Finra’s guidance on social media and websites follows a similar pattern in determining when advisors “adopt” third-party materials and comments. By linking to outside content such as text or video, for example, advisors adopt that content. But they don’t adopt the links within that third-party material — unless the content is merely a collection of other links or the content is made up of material from those links.


Finra’s guidance also clarifies that advice firms can use native advertising, which appears similar to original content on their website, as long as the name of the third party and the relationship is clearly disclosed.

In terms of digital communications, Finra member firms must ensure they can retain communications via text messaging or chat if the firm intends for these communications to relate to its business.

That still leaves some ambiguities, writes Zarabi.

For starters, “intends” can be interpreted differently, but if a firm is actively discussing texting, it’s wise to set up tools for record retention, according to Zarabi, vice president of Hearsay’s legal and compliance department.

Finra’s guidance also doesn’t describe the difference between personal and business communication, but says the content determines what must be kept, she writes.

To comply with Finra’s rules, firms should have policies in place to determine the difference, according to Zarabi. Advice practices may also opt to have advisors have separate lines for business and personal communications, she writes.

By Alex Padalka