Subscribe

Financial advisors are required to keep social media records, even if it’s impossible

by Jay on February 11, 2010

: Image via Wikipedia

The Financial Industry Regulatory Authority (FINRA), which is to stock brokers what the American Medical Association (AMA) is to doctors, recently issued a ruling as to whether traders need to maintain records of their social media communications. The answer was Yes and, more specifically, Yes, even if keeping such records isn’t possible.

Here’s the money quote:

Every firmthat intends to communicate, or permit its associated persons to communicate, through social media sites must first ensure that it can retain records of those communications as required by Rules 17a-3 and 17a-4 under the Securities Exchange Act of 1934 and NASD Rule 3110. SEC and FINRA rules require that for record retention purposes, the content of the communication is determinative and a broker-dealer must retain those electronic communications that relate to its “business as such.” …

Of course, it is up to each firm to determine whether any particular technology, system or program provides the retention and retrieval functions necessary to comply with the books and records rules. FINRA does not endorse any particular technology necessary to keep such records, nor is it certain that adequate technology currently exists. [Emphasis mine.]

Bottom line, if at any point the SEC considers what you’re doing a client communication and/or advertisement, you have to retain a copy of that communication for your records — even if maintaining such a copy is technically impossible! “Facebook ate my stock advisory” is not a viable excuse.

If you can’t keep a producible copy of the communications, the communications are by rule non-compliant. If you don’t have a mechanism in place for backing up your stock-related Facebook, Twitter and blog posts, you as a broker-dealer are not allowed to make stock-related Facebook, Twitter and blog posts.

Put simply, if you don’t have a social media backup service, you can’t use social media to help your stock brokerage. Period. We (not surprisingly) recommend Backupify for the job. But if you’re not backing up with us, broker-dealers, you better be backing up your Wall, your tweets, and your blog with somebody. Otherwise, you may find yourself staring down the barrel of FINRA’s infamously brutal arbitration process. You’ve been warned.