FINRA Rule 4530, Customer Complaints in the Social Media Era

As technology continues to advance, the Financial Industry Regulatory Authority “FINRA”) must address how certain regulations will be interpreted as it relates to social media platforms.  FINRA Rule 4530 requires firms to promptly report to FINRA, no later than 30 calendar days, after it knows or should have known that the firm or an associated person of the firm is the subject of any written customer complaint involving allegations of theft or misappropriation of funds, securities, or of forgery. Under the rule, a customer is defined as any person, other than a broker or dealer, with whom the member has engaged, or has sought to engage in securities activities.  Therefore, firms must even report written complaints from individuals that they haven’t sold their services to directly but have only attempted.

Over the last decade, many social media platforms have made a major impact on the way millions of people interact with each other.  Some of the most notable platforms are Facebook, Twitter, LinkedIn and Instagram. When representatives are first brought onboard to a broker-dealer, they are required to fill out new hire paperwork which includes forms such as Social Media Agreements.  One of the purposes of the Social Media Agreement form is to collect information regarding the registered representative’s desire to use or not use social media for business purposes.  If the representative requests to use social media for business purposes, the firm can either accept or deny the request. If the firm accepts the request, the firm should put controls in place to monitor and keep records of all communications received and sent from the representative’s account.

FINRA released a FAQ relating to written customer complaints.  The FAQ explained that communications such as tweets are composed in written format.  Therefore, under FINRA Rule 4530, firms are required to report any customer complaints received through Twitter.  The FAQ did not address other social media platforms.  However, understanding that FINRA interprets the rule to include customer complaints sent through twitter as reportable, it is safe to assume that all written complaints on any social media platform are deemed reportable.  This includes complaints sent through Facebook’s messenger app, Instagram’s direct messages, and LinkedIn’s messaging feature.

It will be interesting to see if further advances in social media will have any impact on  FINRA Rule 4530.  For now, firms should make sure that they have policies and procedures in place to monitor representatives who use social media for business purposes.  Firms should also train their representatives to know that the definition of written customer complaints extends past traditional emails and letters, but also covers complaints sent through social media.

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