FINRA Rule 2210 requires that firms retain records of communications that relate to their “business as such” under Rule 17a-4(b) of the Securities Exchange Act of 1934 (SEA). Therefore, it is the content of the broker’s communication that determines whether it is regulated under Rule 2210. However, how does the rule apply if the firm or its registered representatives are not the authors of the content? What if the content is created by a third-party? We will discuss how the Rule 2210 applies in such scenarios.
Third-Party Sites
As explained by FINRA, posts by customers or other third parties on social media sites established by a firm or its personnel do not constitute communications with the public by the firm or its associated person under FINRA Rule 2210. Therefore, pre-use principal approval, content and filing requirements do not apply. However, if the firm has paid for or been involved in the preparation of the content or explicitly or implicitly endorsed or approved the content, it will be considered communications with the public.
Hyperlinks to Third-Party Sites
Firms should be careful when sharing third party posts. A firm will be held responsible if it knows or has reason to know that it contains false or misleading content. Additionally, if the firm paid for or was involved in the preparation of the content then it will be held responsible under the communication rules for content on a linked third-party site. Outside of these two scenarios, whether a firm has adopted the content of an independent third-party website is fact dependent.
If the shared link is “ongoing”, according to FINRA, the Firm has not adopted the content. As a result, the Firm would not have the responsibility to maintain records under the communication rules for content. A link is considered “ongoing” if the link meets the following three conditions:
- the link is continuously available to investors who visit the firm’s site;
- investors have access to the linked site whether or not it contains favorable material about the firm; and
- the linked site could be updated or changed by the independent third-party and investors would nonetheless be able to use the link.
If the firm has any influence or control over the content of the third-party site, then it will be regulated under Rule 2210.
Testimonials and Endorsements
Social networking websites make it very easy for individuals to leave testimonials and endorsements for the public to see. For purposes of FINRA Rule 2210, FINRA does not regard unsolicited third-party opinions or comments posted on a social network to be communications of the broker-dealer or the representative for the purpose of FINRA Rule 2210.