The
Financial Industry Regulatory Authority Inc. has backed away from a proposal that would have required broker-dealers to file social-media postings with the regulator.
In an update to a package of proposed communications rules filed with the Securities and Exchange Commission last week, Finra said that in response to comments, it would exclude messages on online interactive forums from a post-use filing requirement.
The securities industry had pushed for the change.
“If every member firm is required to monitor and review all of the online postings of all of its registered representatives, and every member firm is required to file those that trigger a filing requirement, the impact upon Finra is potentially overwhelming,” the Securities Industry and Financial Markets Association wrote in a comment letter this month.
Finra has been treating interactive posts as “public appearances,” which must be supervised but do not necessarily have filing requirements.
The self-regulator is proposing to do away with the public-appearance category of communications, and treat online posts as correspondence.
In proposing the latest changes to its communications rules, Finra said it disagreed with the argument that online posts are like public appearances because the posts remain available to the public for an extended period of time. But Finra said it is nevertheless proposing to exclude them from a filing requirement.
The oversight of social media has been a tricky area for firms and regulators, who have struggled to supervise the communications without impeding spontaneous conversations.
Finra's proposal should help improve communications to investors, said John Drachman, founder of The Drachman Group Inc., a marketing consultant.
But he advises financial firms to follow stricter procedures for any product-specific posts.
“For example, a member forum that addressed the use of managed futures in a portfolio should be excluded from retail filing requirements,” he said, “while a member forum that weighed the advantages of one managed futures fund versus another should continue to file its communications.”
