On April 2, 2013, the SEC released a report on the use of social media by public companies, in which it clarified that public companies may use social media such as Twitter and Facebook to announce information in compliance with Regulation FD if they tell investors and shareholders ahead of time which social media they will use to disseminate that information.
The Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers, has been concerned about the pervasive influence of the social media for some time. In 2011 it compiled a “Guide to the Web for Registered Representatives” that enumerated and explained compliance requirements for its members.
Now it’s gone a step further, insisting that brokers’ postings in social media such as Twitter and Facebook must be monitored to ensure that they comply with its rules. The regulator has sent letters to about 10 states in which existing or proposed legislation would prohibit such monitoring, asking that broker-dealers be exempt from those prohibitions.
FINRA has not provided information on whether it intends to monitor all or selected member accounts or about how the monitoring would be accomplished.
If brokers use social media to communicate about stocks, FINRA believes that as their regulator it should have access to those accounts. Access, they say, is necessary to prevent abuses that could harm investors.
Registered reps should assume that if FINRA gets its way, the SEC will also have access to their Facebook and Twitter accounts. The concern of civil libertarians is that they might eventually be able to extend that access to family photos, private email, and much more.