The phrase “Taking Care of Business (TCB)” is synonymous with the King of Rock n’ Roll Elvis Presley, who utilized the acronym with a lightning bolt as his personal logo. When it comes to social media marketing, the Financial Industry Regulatory Authority (a.k.a. FINRA) has taken a page out of Presley’s book, but instead of business, the agency is far more focused on how securities firms are taking care of compliance.
Last year, FINRA reviewed more than 66,000 advertising and sales communications, and as recently as September 2021, the agency signaled its intent to investigate “practices related to the acquisition of customers through social media channels” by the broker-dealers, capital acquisition brokers and funding portals under its purview, including “how [those] firms manage their obligations related to information collected from those customers and other individuals that may provide data to [those] firms.”
In addition, the dissemination of “false and misleading communications to millions of individuals through a digital marketing campaign that included social media, internet advertisements, target marketing…and an incentivized referral program” was one of many compliance missteps FINRA cited in its high-profile consent order against Robinhood Financial, LLC. As a result, FINRA ultimately imposed a $57 million fine against the company and required it to pay $12.6 million plus interest in restitution to affected customers.
Like other financial regulators, FINRA is keenly aware of the impact and reach digital marketing strategies like social media have on consumers, and as with any other form of communication, the agency expects its regulated broker-dealers to ensure all their advertisements – whether they appear digitally or in print – do not deceive or mislead consumers about the nature of the investment products being sold. Section 2200 of FINRA’s Official Rulebook covers the agency’s rules and expectations regarding broker-dealers’ duties and conflicts, which includes an extensive list of what FINRA considers to be communications with the public outlined in Section 2210. To aid broker-dealers in ensuring compliance with their social media communications specifically, FINRA has highlighted the following key areas of concern in its social media compliance overview:
Of course, these are just a few of the many areas where broker-dealers must be mindful of ensuring compliance with FINRA requirements. The agency’s Advertising Regulation overview page provides a deeper dive into all aspects of compliance in this area, including social media. As its record judgment against Robinhood Financial indicates, FINRA takes its consumer protection mandate seriously, and social media marketing is a key area of concern for the agency in that regard. Thus, broker-dealers must ensure their overall communication compliance strategy includes appropriate oversight and monitoring of social media content, lest they find themselves at the wrong end of an enforcement action or regulatory fine.
Social media is a free tool utilized by millions of sales folks worldwide to promote brand...