Social Media and Public Communications: Helping You Get It Right (Advertising Track/B2BC) Monday, May 23 10:45 a.m. 11:45 a.m.

Transcription

1 Social Media and Public Communications: Helping You Get It Right (Advertising Track/B2BC) Monday, May 23 10:45 a.m. 11:45 a.m. New to the advertising rules? This back to basics compliance session provides attendees with what they need to know when creating and supervising social media and other communications. Senior staff from FINRA s Advertising Regulation Department will lead this interactive workshop and answer your questions about how to stay in compliance when communicating through social networks, advertisements, and mobile devices. The presentation covers the fundamental rule requirements, their underlying principles and practical tips. Moderator: Greg Riviello Director FINRA Advertising Regulations Panelists: Pramit Das Assistant Director FINRA Advertising Regulations Steven O Mara Manager FINRA Advertising Regulations 2016 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

2 Social Media and Public Communications: Helping You Get It Right Panelist Bios: Moderator: Gregory Riviello is the Director in FINRA s Advertising Regulation Department. The Department is responsible for the regulation of FINRA member firms communications with the public. His daily responsibilities include supervising the activities of staff devoted to the review of communications routinely filed with the Department by FINRA member firms. Other responsibilities include managing and coordinating the recruiting, training and quality control functions of the Department. Mr. Riviello has been with the Advertising Regulation Department since 1990 and has over 30 years of experience in the securities industry. He is a graduate of West Chester State University in West Chester, Pennsylvania, and holds an MBA from the University of Maryland. Panelists: Pramit Das is the Assistant Director of FINRA s Advertising Regulation Department. In this role, his responsibilities include managing two filings review groups; assisting with administration of the filings review program; developing and maintaining the department s technology needs; providing education to members, FINRA staff and other regulatory staff; and participating in certain rule amendment and rulemaking projects as necessary. He served in the same role at NASD before its 2007 consolidation with NYSE Member Regulation. Prior to joining NASD in 1994, Mr. Das worked for Metropolitan Life Insurance Company and Arthur Andersen & Co. He holds an MBA in Finance from the University of Maryland, College Park, and an MA in Financial Economics from Clemson University, Clemson, South Carolina. He was also Series 7 and 63 registered. Steven O Mara is a manager in FINRA s Advertising Regulation Department. Before joining Advertising Regulation, he spent three years in the Market Regulation Department. He also worked for four years as a compliance officer for a regional brokerage firm. Mr. O Mara holds a master s degree in business from Johns Hopkins University and a bachelor s degree from Saint Anselm College Financial Industry Regulatory Authority, Inc. All rights reserved. 2

3 FINRA Annual Conference May 23 25, 2016 Washington, DC Social Media and Public Communications: Helping You Get It Right (Advertising Track/B2BC)

4 Panelists Moderator Greg Riviello, Director, FINRA Advertising Regulation Panelists Pramit Das, Assistant Director, FINRA Advertising Regulation Steven O Mara, Manager, FINRA Advertising Regulation 1

5 FINRA Advertising Regulation Department Filings review Investigations Sweeps Member outreach and education Contact information: Website: Telephone Number:

6 FINRA Rule 2210: Definitions Retail Communication Any written or electronic communication distributed to more than 25 retail investors within any 30-calendar- day period. Correspondence Any written or electronic communication distributed or made available to 25 or fewer retail investors within any 30-calendar-day period. Institutional Communication Any written or electronic communication distributed or made available only to institutional investors. Does not include a member's internal communications. 3

7 FINRA Rule 2210: Supervision of Institutional Communications and Correspondence FINRA rules permit firms to implement their own customized supervisory procedures for institutional communications and correspondence. Firms may take a risk based approach that permits post use review or the use of sampling, instead of prior to use approval. If a firm s procedures do not require prior to use principal approval, then the firm must: Train personnel on the procedures; Conduct surveillance reviews to test compliance; Document the reviews; and If problems are revealed, document findings and corrective actions taken. 4

8 FINRA Rule 2210: Internal Approval of Retail Communications An appropriately qualified, registered principal must approve each retail communication prior to use or filing with FINRA. Exceptions from principal approval include: Retail communications, supervised in the same manner as correspondence, that: Do not make any financial or investment recommendation or promote a product or service; Are posted to an online interactive electronic forum (social media); Are excepted from the definition of research report (e.g., market letters); and Retail communications, filed by another firm, and found by FINRA to be consistent with standards. 5

9 FINRA Rule 2210: Recordkeeping Retain all communications for 3 years as required by the Securities Exchange Act of 1934 (SEA) Rule 17a-4(b). Records for retail and institutional communications must include: A copy of the communication and the dates of first and last use; The name of the registered principal approving the communication; The date of approval; and Information concerning the source of any statistical table, graph, or illustration. 6

10 Filing Requirements for Retail Communications 10 business days prior to first use, firms must file: Widely distributed retail communications for one year from a new firm s membership effective date; Retail communications about customized mutual fund rankings; and Options retail communications used before delivery of disclosure document. Within 10 business days of first use, firms must file retail communications concerning: Registered investment companies (e.g., mutual funds, ETFs); Direct participation programs and collateralized mortgage obligations; Derivative products registered under the Securities Act of 1933; and Investment analysis tool reports. 7

11 FINRA Rule 2210: Exceptions to the Filing Requirements Institutional communications Correspondence Interactive social media posts Retail communications that do not make any financial or investment recommendation or otherwise promote a product or service Previously-filed material Laundry list of investment products Statistical or non-narrative updates to previously-filed template communications Prospectuses and free writing prospectuses filed with the SEC. 8

12 FINRA Rule 2210: Content Standards General standards for all communications. Communications must be fair and balanced, and must provide a sound basis for evaluating the facts regarding any product or service. Material information that would cause the communication to be misleading may not be omitted. False, exaggerated, unwarranted, promissory, or misleading statements or claims are prohibited. Important or material information should not be in legends and footnotes. Clarity and context. Nature of the audience. Communications may not predict or project performance. 9

13 FINRA Rule 2210: Other Content Standards Retail communications and correspondence Disclosures: FINRA member name Tax-free claims and tax-deferred compounding Fees and expenses for open-end mutual fund performance Regarding testimonials Use of FINRA name and linking to the FINRA website. Retail communications Comparisons must disclose all material differences. Recommendations: disclosure concerning conflicts of interest. 10

14 Social Media New medium, same rules apply: Social media extends a firm s ability to communicate, but does not change the basic rules of the road. The rules are designed to protect investors from false, misleading, or exaggerated statements or claims and from omissions of necessary information. Core concepts: Personal vs. business use. Static vs. interactive communications. Adoption and entanglement. 11

15 Business vs. Personal Use FINRA s guidance does not apply to personal use of social media. Firms must educate their representatives to distinguish between business and non-business (personal) communications. Autobiographical information may not cause a personal communication to become a business communication. For example: ing a resume to a prospective employer. Identifying one s employer on a social media profile page that is not used to promote the broker-dealer s business. 12

16 Supervision: Static vs. Interactive Static content is typically posted for the longer term and lacks the immediacy of a real time conversation. May include background or profile data. Static content must be approved prior to use by a registered principal; may be subject to a filing requirement. Interactive communications are typically real-time and involve a dialog with third parties. May include status updates, or comments on another s post. Interactive content may be supervised flexibly in accordance with firm s written supervisory procedures; not subject to the filing requirements. 13

17 Supervision: Guidance Key Points From Regulatory Notice 11-39: Registered principal must review prior to use any social media site that an associated person intends to use for business and the site must be in the form in which it will be launched. May only approve sites if the principal has determined the associated person can and will comply with applicable rules. 14

18 Third-Party Posts: Adoption and Entanglement Third-party posts are not subject to FINRA s advertising rules unless the firm has adopted or becomes entangled with the third party content. The recordkeeping requirements apply to third-party content posted in a firm s interactive electronic forum. Common practices for firm-sponsored websites: Monitor third-party posts to block offensive material. Establish usage guidelines for third parties that are permitted to post. Screen third-party content based on the expected usage and frequency of third-party posts. Disclose firm policies regarding responsibility for third-party posts. 15

19 Third-Party Websites and Links A firm is not responsible for the content on a third-party site it links to if the firm does not: Adopt or become entangled with the content of the third-party site; and Know, or have reason to know, that the site contains false or misleading information. 16

20 Suitability Responsibilities Suitability rules apply to recommendations made through social media websites. Develop procedures to supervise interactive electronic communications that recommend specific products. Consider prohibiting interactive electronic communications that recommend specific products unless: A registered principal has previously approved the content; or The recommendation conforms to a previously approved template. 17

21 Social Media Reference Material and Resources Regulatory Notice 10-06, Guidance on Blogs and Social Networking Web Sites (January 2010). Regulatory Notice 11-39, Social Media Websites and the Use of Personal Devices for Business Communications (August 2011). Regulatory Notice 12-29, SEC Approves New Rules Governing Communications With the Public (June 2012). FINRA Rule 2210 Questions and Answers available at 18

22 Sample Advertisement 19

23 Questions and Answers 20

24 Social Media and Public Communications: Helping You Get It Right Sample Advertisement

25 Home Profile Friends Career What is ConnectOn? Join Today Sign In 2 ASTEROID Financial Services, Inc. Asteroid Financial Services, Inc. Investment Management employees 13,008 connections Following 1,025 people viewed your profile in the last 90 days 13,008 followers About Us Asteroid Financial Services, Inc. was founded in 1993 and has over 20 solid years of investment management experience. Asteroid and its affiliates provide clients with an array of investment strategies and solutions. From our cutting edge suite of mutual funds, that have provided investors with consistent and profitable returns to ETFs, bonds, nontraded REITs, and private placements, Asteroid is your one stop shop for ALL your investment needs!!! Website Industry Type Investment Management Public Careers Interested in jobs at Asteroid? 8 jobs posted Employees See Jobs > Recent Posts Asteroid Check out our family of top of the line mutual funds. Specifically, our new Value Opportunity Fund which has out performed! See connections > Like. Comment. Share. 21 hours ago Ads you may like Asteroid Have you seen our latest blog post? Investing for a happy retirement. Investing for a happy retirement Retirees want income but can t afford volatility. $1.99 News & Stock Magazine Click to subscribe Luke Shatner, CEO of Asteroid, discusses our High Yield Bond Fund. Check it out! Like (4). Comment. Share. 2 days ago Asteroid REITS - Looking for stability in a rising interest rate environment and protection from market volatility? Very compelling article about non-traded REITs by our friends over at REITS R US. Like (2). Comment. Share. 4 days ago About Contact Us Privacy & Terms ConnectOn Inc. 2015

26 Additional Information Filing Information: Social media homepage Obtained during a sweep focused on social media. About Us Became available to the public on July 1, Not reviewed or approved by a registered principal of the firm. Not filed with the Advertising Regulation Department. Recent Posts Interactive portion of the ConnectOn page. Not reviewed or approved by a registered principal of the firm. Not filed with the Advertising Regulation Department. Contains a link to the firm website that includes a prospectus offer for the Asteroid Funds. The Investing for a happy retirement article: Discusses the Asteroid High Yield Bond Fund. Reviewed and approved by a registered principal on April 14, Date of first use: April 14, 2016 Filed with the Advertising Regulation Department on May 1, Asteroid High Yield Bond Fund Information: Investment objective: seeks to maximize total return. Investment strategy: invests up to 80% of its portfolio in below investment grade bonds. Asteroid Value Opportunity Fund Information: The hyperlink for the Asteroid Value Opportunity Fund links directly to the standardized performance in the firm s website. Performance: As of 3/31/2016 YTD 1 Year 5 Year Since Inception 1/1/08 As of 9/30/15: YTD 1 Year 5 year Since Inception (1/1/08) Value Opportunity -.32% 1.46% 5.92% 5.75% Benchmark Value Opportunity -.75% -.32% 2.02% 1.46% 6.35% 5.92% 5.75% 6.43% Benchmark -.75% 2.02% 6.35% 6.43% Other Information REITS R US is not affiliated with Asteroid. Asteroid links go to the Asteroid homepage that includes a discussion of the risks associated with the Asteroid mutual funds, REITs, and other products.

27 Home Profile Friends Career What is ConnectOn? Join Today Sign In 2 ASTEROID Financial Services, Inc. Asteroid Financial Services, Inc. Investment Management employees 13,008 connections Following The section should have been: Reviewed and approved by a principal Filed within 10 days of first use About Us Asteroid Financial Services, Inc. was founded in 1993 and has over 20 solid years of investment management experience. Asteroid and its affiliates provide clients with an array of investment strategies and solutions. From our cutting edge suite of mutual funds, that have provided investors with consistent and profitable returns to ETFs, bonds, nontraded REITs, and private placements, Asteroid is your one stop shop for ALL your investment needs!!! Website Industry Type Investment Management Public 1,025 people viewed your profile in the last 90 days 13,008 followers Unwarranted as no basis provided. Careers Exaggerated. Interested in jobs at Asteroid? 8 jobs posted Unwarranted and promissory. Employees See Jobs > Recent Posts Asteroid Check out our family of top of the line mutual funds. Specifically, our new Value Opportunity Fund which has out performed! Like. Comment. Share. 21 hours ago Asteroid Have you seen our latest blog post? Investing for a happy retirement. Investing for a happy retirement Retirees want income but can t afford volatility. Reference Ads you is may unwarranted like and misleading as the Fund only outperformed benchmark for YTD and YTD is negative. See connections > $1.99 News & Stock Magazine Click to subscribe Like (4). Comment. Share. 2 days ago Luke Shatner, CEO of Asteroid, discusses our High Yield Bond Fund. Check it out! Article was filed late with Advertising Regulation. Title is misleading as it implies the product discussed, a high yield bond fund, is not volatile. Asteroid REITS - Looking for stability in a rising interest rate environment and protection from market volatility? Very compelling article about non-traded REITs by our friends over at REITS R US. Like (2). Comment. Share. 4 days ago Unwarranted claim, especially when discussing REITS. Responsibility of Asteroid to ensure third-party links are not misleading. About Contact Us Privacy & Terms ConnectOn Inc. 2015