California's Gov. Brown signs privacy law opposed by financial industry

Finra, SIFMA say oversight of social-media use by advisers at risk

Sep 28, 2012 @ 1:20 pm

By Dan Jamieson

California Gov. Jerry Brown on Thursday signed social-media-privacy legislation the financial services industry argues will impede oversight of social-media use by advisers.

The law, which goes into effect next year, prohibits employers from requiring that employees or job applicants provide passwords to personal social-media sites.

“The Golden State is pioneering the social media revolution and these laws will protect all Californians from unwarranted invasions of their personal social-media accounts,” Mr. Brown said in a signing statement.

The Securities Industry and Financial Markets Association had asked Mr. Brown to veto the legislation.

“We believe the bill, while well-intended, conflicted with the duty of securities firms to supervise, record, and maintain business-related communications as required by federal, state and other self-regulatory organizations,” SIFMA spokesman Andrew DeSouza wrote in an e-mail.

The Financial Industry Regulatory Authority Inc. also opposed the legislation.

The concern is that, even though firms can prohibit advisers from using personal sites for business purposes, there's no way they can be sure a representative or adviser is complying.

Other industry groups, however, supported the legislation, seeing it as a shield from claims that they have a duty to monitor what employees say on social media sites.

Mr. Brown's signing is sure to add momentum to a nationwide trend to protect employee privacy.

A similar law in Maryland goes into effect next month and legislation in Illinois becomes active Jan. 1.

In addition, other states are working on social-media-privacy bills, and a proposed federal law, the Password Protection Act of 2012, would make it illegal for an employer to compel or coerce access to any private online information, according to its sponsors.

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