FINRA has long regulated and limited the ability of
broker/dealers to communicate with the public. One of their missions is to
protect the investing public from unscrupulous securities brokers. Twitter is a
communications tools and any messages posted to Twitter will need to be in
It was inevitable that we would see a FINRA regulated
party make a mistake using Twitter. The time has come.
FINRA also found that during eight months in 2009, the
registered representative maintained a Twitter account and had more than 1,400
followers. Without notifying a principal of her employer firm, the registered
representative posted 32 "tweets" related to a particular security. The tweets were
unbalanced, overly positive and often predicted an imminent price increase. In
the tweets, the representative failed to disclose that she and her family held
a significant number of shares of the security. FINRA concluded that this
conduct violated NASD
Rules 2210 (communications with the public) and IM-2210-1 (guidelines to
ensure that communications with the public are not misleading), and FINRA
Rule 2010 (ethical standards).
To me, this sounds exactly like the behavior FINRA is
trying to prevent by imposing Rule 2210 on financial representatives.
I don't want to overstate the effect of this Twitter
failure on the discipline. The registered representative was doing some other
things in violation of the rules. I would guess that once a registered
representative is under investigation FINRA takes a look at that person's
social networking activity to see if they have been doing other bad things.
additional commentary on developments in compliance and ethics, visit Compliance Building,
a blog hosted by Doug Cornelius.
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