US regulatory body Finra has issued guidance to securities firms and brokers on the use of social networking Web sites such as facebook, Twitter and LinkedIn to communicate with the public.
The watchdog - which oversees nearly 5000 brokerage firms and 633,000 registered representatives - set up a task force to explore the compliance challenges posed by new Web 2.0 communications channels back in October.
It has now issued guidelines in a Q&A format clarifying firms' responsibilities in supervising the use of social networking sites to ensure that recommendations are suitable and their customers are not misled.
Finra says firms need to develop their own policies and procedures to ensure they, and their staff, are complying with all applicable requirements when using social networking sites.
A major concern revolves around the retention of electronic communications records, which both Finra and the SEC currently require firms to preserve for a minimum of six years for audit and compliance purposes.
Finra notes that technology providers are currently developing systems intended to enable firms to retain records of communications made through social networking sites but stresses it "does not endorse any particular technology to keep such records, nor are we certain that adequate technology currently exists".
Rick Ketchum, chairman and CEO, Finra, says: "Social networking sites and blogs raise new regulatory challenges, particularly in the areas of supervision, advertising and books and records requirements. Our goal in issuing this notice is to ensure that firms and brokers use social networking sites in an appropriate manner."
Finra's guidance comes weeks after the US National Futures Association set out highly restrictive compliance rules on the use of social networking channels such as blogs, chatrooms, forums, facebook and Twitter by member financial firms.
You can read the guidance here:» Download the document now 107.8 kb (PDF File)