Did you know that soliciting or giving endorsements on certain Social Media platforms can constitute possible grounds for a FINRA compliance violation? As a financial advisor using LinkedIn in particular, you can avoid potential compliance issues and continue to make posts here and on other social media that do not constitute a compliance threat.
Should you or any of your staff routinely make posts or endorse posts on LinkedIn and other social media that may be cause for concern should compliance regulators get it on their radar, Krantz can help.
In this article, we’ve compiled some interesting facts about potential compliance issues for financial advisors on LinkedIn and other social media who could get into trouble if they do not take certain regulatory compliance precautions on social media.
FINRA, the SEC, and the New Compliance Regulations
For years, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have been trying to adapt their regulations to the social media world. Here, we’d like to expand on that and discuss how you can safely participate on LinkedIn without incurring financial compliance penalties. To do this, though, you must follow a few easy, and likely familiar, rules.
If you are trying to take advantage of the power of LinkedIn to connect with potential clients, you are likely coming up with some resistance from your compliance department. Advances in social networking have happened much quicker than regulators can regulate, leaving advisors and compliance departments wondering what they should be doing.
Registered representatives affiliated with FINRA broker-dealers are heavily regulated by financial compliance laws. FINRA has taken steps to issue some guidance about how best to use social media. Different firms handle social media differently. You can choose to send any information you want to post in LinkedIn to compliance for approval, or you can adhere more strictly to FINRA’s Rule 206(4) which discusses the way advisors can advertise, promote themselves, or receive testimonials.
Either way, you are still demonstrating a conscientious attitude towards your social media activity, and as such, will be doing yourself and your firm a huge “solid”.
LinkedIn endorsements and solicitations have proven to be especially problematic in this area. Investment News has a good article on this subject worthy of a read.
To remain FINRA-compliant as financial advisor using social media, it is very important that your firm have a written-out social media policy. This policy should detail the types of activities that are permissible on LinkedIn and other social networks.
If you participate as a financial advisor on LinkedIn and other social networks, we’ve provided some ideas to consider to keep the compliance department happy and develop your business.
Implement Good Social Media Policy
It is very important that you have a written social media policy. Your policy should detail the types of activities that are permissible on LinkedIn and other social networks. The policy should be clear about what is not permissible and the steps an advisor is to take in order to get questions answered. Remember, these social platforms are constantly changing, so questions will be asked often.
Your social media policy should address questions like, “What kinds of posts are permissible?” and “May a financial advisor join groups, comment, provide answers and start discussions?”
Your policy should discuss who financial advisors may connect with, the type of information that can be put into a profile and whether the advisor and/or the staff are permitted to use social networks during the workday. Many companies are creating profile templates for their advisors to use. This is an idea you should give some serious thought to implementing.
The policy should also discuss compliance review. Since compliance is already reviewing your marketing materials, website content, etc. you may wish to follow the same procedures with your LinkedIn work.
Profiles, blog posts and other activities of this more static nature will likely need to be approved in advance. Interactive activities like posts on LinkedIn and Twitter don’t have to be reviewed in advance, but must be supervised. Check with your compliance department about this. It may be difficult for the compliance department to supervise these posts in real time, so they may require advance approval.
Be aware that your activities on social networks are considered business activities – a record of which is ultimately kept somewhere. You shouldn’t do something on LinkedIn or other social media that you wouldn’t think of doing in another business setting.
All Activity on Social Networks Should Be Archived
Just like everything else you do, be sure to create an “audit trail”, and archive your work on social networks. Set up a mechanism to archive all your social media activity, including comments and posts on LinkedIn and make backup copies of your archives.
Since you understand why this is necessary, we don’t need to go into a lot of detail here. The essence of it is, you want to be able to answer questions regulators may ask and reserve the ability to go back over an advisor’s activity to confirm it is in compliance with your policy.
Understanding LinkedIn Recommendations
LinkedIn recommendations can be tricky for FINRA brokers. Save yourself some time and check to see what your compliance department says about LinkedIn recommendations. In many cases, they are allowed as long as your client doesn’t tell people you guaranteed results, and instead focuses on your skill set as a financial advisor. Remember, you can always edit a recommendation before posting it. Make it a policy to edit when necessary and then confirm your edits with the original writer.
Standardize Smart Practices
Because “to err on the side of caution” is good business policy any way you cut it, some compliance advisors have endorsed the caveat, “Think Before You Tweet!” In other words, think it through before you like a Facebook post or +1 a Google+ post. Think before you re-tweet and remember, FINRA rules mention that commenting on third-party social networking posts may be construed as an endorsement.
This can all be made very easy by using your common sense and remember that your activities on social networks are considered business activities – a record of which is ultimately kept somewhere. You shouldn’t do something on a social network that you wouldn’t think of doing in another setting. Financial advisors should be using social media to develop their credibility and obtain referrals.
There’s no better time than the present to get social-media and FINRA-compliant. Each day you wait to adopt more FINRA-compliant social media policies you get further behind. Know that although it is possible to do pretty much whatever you want to do on social networks, just be sure to get all the necessary compliance legwork done in advance before you do so.
Get FINRA-Compliant and Much More
We collaborate with fellow Manhattan companies to implement more long-term, preventative strategies that ensure stronger network security, compliance readiness, and optimal IT-network performance. New York financial firms also like our fixed-rate billing that makes budgeting their managed IT services as easy and predictable as paying the monthly light bill.
Helping NYC Financial Advisors on LinkedIn Avoid FINRA Compliance Issues
If you’re worried about questionable LinkedIn posts or other social media faux pas as a FINRA broker, relax! With help from a leading IT consulting firm in New York like Krantz Secure Technologies, you’ll remain in good standing with the FINRA regulatory compliance laws.
Contact us today at (212) 286-0325 or email us at [email protected] for more information or help with establishing better social media protocols and, specifically, LinkedIn policies to help financial advisors avoid FINRA compliance violations.