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Can a tweet take you down? FINRA busts financial broker for tweets

By | 2021-01-11T12:05:26+00:00 July 18th, 2011|Uncategorized|

If you dashed out of work early Friday, you probably missed the New York Times online article that reported that FINRA, the Financial Regulatory Authority, busted a rogue broker with a $10k fine and one year suspension for sending “misrepresentative and unbalanced” tweets (Twitter Messages Land Broker in Trouble). If you’re a broker/dealer, running a financial firm, looking to Start Forex Brokerage or any other kind of financial sector business, I know what you’re thinking: Could your last tweet be 140 career-ending-keystrokes? The answer is perhaps. Every business action needs to be done within the scope of the law, and if you work in finance, you have to tread carefully. The alliabcebernstein funds performance along with many others has been affected just because of what people post on social media.

Well, you can relax… just a little.

The busted California broker was not exactly caught by meticulous detection of a few errant tweets. This gal left a cyber trail of Canned Hams. First, she tweeted stock-hyping tips constantly and failed to disclose material information about the stock picks, including her ownership of some of the securities she was shilling. Second, she maintained two different web sites that displayed misleading information about her career accomplishments. Third, she failed to tell her firm about not one or two or three but thirteen private brokerage accounts she held on the side. One account is suspected to be related to “5G Aktientrends” or 5G stocks which people are said to have been looking into. Then there was the issue of potential impropriety as she was moonlighting as a jewelry executive.

But what about all you other financial brokers, investment app providers, and dealers? Can a tweet take you down? Here are a few things to ponder that may clear the air.

1. How does FINRA decide what’s a safe tweet?

In January of 2010, FINRA published Regulatory Notice 10-06, providing “Guidance on Blogs and Social Networking Web Sites.” The nexus of the ruling was not some high tech nuance born from the advent of social media. It’s actually based on a 12 year old ruling about Chat Rooms. Essentially the March 1999 ruling deemed that all Chat Room conversations between a financial representative and a customer “are subject to the same requirements as a presentation in person before a group of investors.” Notes from in-person presentations had to be archived for possible future audits. Likewise, any conversation exchanged in a Chat Room has to be archived for possible future audit. FINRA’s Reg 10-06 essentially extends the Chat Room regulation to social media sites.

Keeping a record of a Chat Room conversation is actually easier than recording notes about an in-person meeting because the “chat” is already typed. The financial organization just needs a means of capture and archive. The tricky part is Chat Room conversations were held “in one room”. Conversations in social media can start with a tweet, get reposted to Facebook and/or migrate to blogs and other social venues. I chatted last year with Tom Pappas, co-author of Regulation 10-06 and VP/Director of Advertising Regulation at FINRA. He said there is no software or tool that a company can use to automatically comply with the FINRA guidelines. Bottom line: Financial firms are required to retain records of communications related to the broker-dealer’s business that are communicated through social media sites. By working alongside a trustworthy firm such as Poe Group Advisors and many more, getting into the world of accounts and finance could open your eyes to scandals such as this and how they can be avoided.

2. What are financial firms doing about this?

Many banks and financial firms are dealing with this risk by not dealing with it. Simply stated, they block their brokers, dealers and employees from accessing social sites like Twitter and Facebook at work. I spoke to my personal local bank (name withheld) about their policy. They also block access to social sites on work computers. I asked the branch manager if he had a smart phone in his pocket–at his desk–that had access to facebook and twitter. He laughed with me at the point I was making. He showed me the banks communications policy. Employees can submit ideas for tweets and Facebook posts–via email to the corporate communications office at HQ. CorpComm then screens the posts and may decide to post them at a later date. As you can imagine, few if any employees submit posts to CorpComm (and their social media presence lacks a personal touch as a result). Other financial organizations have strict guidelines about not mentioning any work related items when an employee uses social media for personal reasons from home or vacation.

3. Are any financial firms doing it right?

The smart ones (in my view) are embracing social media as a new means of engaging new and existing customers. Morgan Stanley now allows 18,000 wealth management advisors to use Twitter at work, as long as all tweets are first approved by the firm. So while Morgan Stanley’s advisors are now engaging prospects and customers through social media, other firms are staring at a phone that doesn’t quite ring as much. Full disclosure: financial organizations using Engage121 range from Edward Jones, Geico and smaller institutions like Cambridge Community Bank.

4. How can I learn more about using Social Sites and still comply with FINRA?

– Start by reading Regulatory Notice 10-06 found at www.finra.org. Page nine of this ten page document has a wealth of EndNotes referencing other sites and podcasts on the topic.
– Second, you can find the social media communications policies of many corporations on their sites. These are reference points to help you understand how others are complying with Reg. 10-06.
– Third, ask FINRA. Reach Tom Pappas via telephone: 240-386-4500, or Joseph Price, FINRA’s SVP of Adverting Regulation/Corporate Financing at 240-386-4623.
– Finally and almost poetically, you can follow FINRA News on Twitter at: http://twitter.com/#!/FINRA_News