The Social Media Experiment: Challenges for Broker-Dealers and Investment Advisers


The announcement by a Wall Street firm that it plans to give its financial advisers limited access to social media websites has been viewed by many as inevitable. Morgan Stanley’s foray into the fast-changing world of social media highlights the difficulties faced by broker-dealers and investment advisers and the regulators who oversee them. As more financial firms follow suit, regulators will struggle to enforce securities laws that were written when the telephone and the telegraph were the prevailing social media. Federal securities laws require broker-dealers and investment advisers to comply with a panoply of detailed rules designed to ensure that customers and clients are not misled. The rules require them to keep records of every paragraph, sentence, and word – and now, every tweet. The challenge: how can financial firms comply with these strict rules while satisfying the market’s growing passion for communicating by texts and tweets? And how can regulators enforce two-dimensional securities laws in the new three-dimensional world? The exponential jump in social media usage has attracted the attention of federal securities regulators, who have responded with additional guidance and enforcement actions. The Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers, published guidance on blogs and social networking websites in January 2010. This was followed by guidance on social networking websites and business communications, posted in August 2011.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP | Attorney Advertising

Written by:


Morrison & Foerster LLP on:

Popular Topics
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.

Already signed up? Log in here

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.