Social media has given brokerages new ways to market themselves, but Finra is warning them to apply greater scrutiny and controls of influencers who help them land new customers.
The Financial Industry Regulatory Authority Inc. launched an exam sweep in September 2021 to probe how its member firms use TikTok, Twitter, Instagram, Facebook and other social media platforms. On Wednesday, it posted an update on the initiative that included best compliance practices for engaging so-called finfluencers.
Firms should differentiate between social media influencer and referral programs and consider “additional controls for social media influencers with a relatively large social media presence,” Finra said in the sweep update.
The regulator recommended evaluating finfluencers’ background and prior activities for potential compliance and reputational risks. It also encouraged firms to outline prohibited finfluencer conduct, provide training on using them and prevent the release of private customer information.
“This is a reminder greater access to retail investors requires greater vigilance,” said Jessica Reece, a partner at Ropes & Gray. “It’s so easy to say something and click ‘post’ without thinking of the ramifications. Each post can matter.”
The sweep update allows Firna, the broker-dealer self-regulator, to put another stake in the ground on a popular trend that the Securities and Exchange Commission is also scrutinizing. The SEC has put on its regulatory agenda a proposed rule for digital engagement practices for investment advisors.
Finra stressed in the sweep update that brokerages should ensure their supervisory systems are up to the task of monitoring their social media activity and keeping it in bounds.
“It’s a good opportunity for firms to revisit their procedures in this area, even if they did so in response to the initial [sweep] letters,” said Tim Nagy, a partner at Mayer Brown.
The update is Finra’s way of being transparent about its expectations.
“It’s better than firms having to read through the tea leaves of enforcement actions,” said Nagy, a former counsel in Finra’s market regulation division.
[Topic: Regulation news]
Finra wants to see more than updated policies and procedures, Reece said. It is looking for evidence that firms are putting them into practice.
“That’s an extra step we’re seeing from regulators more and more,” she said. “Tell us what you do. Tell us how you train your people and carry out these procedures.”
Finra did not indicate in the update how long the sweep would last.
Matthew Klein on Rethinking Portfolios in a New Era.
As retirement costs climb, millions of millennials and Generation X adults continue relying on parental support, highlighting obstacles to retirement readiness.
Les Smith, who once played alongside future MLB stars Eugenio Suárez and Nick Castellanos, says lessons from professional baseball helped fuel his transition to independent wealth management after 11 years at Edward Jones.
A November hacking incident involving cloud apps used by three employee exposed names, Social Security numbers, and other account data, the mega-RIA said.
Paul V. Morris worked at multiple firms across Wall Street and most recently in Manhattan for Merrill Lynch.
As $84 trillion prepares to change hands, advisors who treat estate planning as peripheral are quietly building a sieve, not a book.
In volatile markets, the advisors who win aren't the ones with the best calls - they're the ones whose clients stay the course.
