Richard J. Rabin, Alice Hsu, Francine E. Friedman and Renuka S. Drummond discuss the challenges broker-dealers and other financial advisory firms encounter in their efforts to monitor the business-related activities of their associated persons on social media, as required by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission under the Investment Advisers Act of 1940, as amended (the Advisers Act).
Existing regulatory regimes that have an impact on social media often conflict, placing firms in the untenable position of having to risk violating one set of laws in order to comply with another. On the one hand, FINRA and the Advisers Act require firms to take steps to prevent financial advisers from using social media in a way that could present an undue risk to investors. On the other hand, the National Labor Relations Board and various state laws place significant limits on firms' ability to monitor or restrict their employees’ social media usage. This article addresses steps companies can and should consider in light of the conflicting regulatory regimes.
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