Social Media for Financial Services, Broker-Dealers and Financial Advisors. FINRA's 10 Commandments, 10-06. Case studies: Morgan Stanley, Charles Schwab, Citi. Principal approval and supervision. Archiving. Policies and training. Applying FINRA's guidelines.

1. FINRA’s 10 Commandments of Social Media Engagement for Financial Firms Glen Gilmore, Esq. Adjunct Professor of Digital Marketing & Social Media Law @FinCMO @GlenGilmore @SocialMediaLaw1 *This presentation may be shared for non-commercial purposes.

2. “Americans are increasingly using social media…” January 2010 10 Q and A.And so it began….

3. DISCLAIMER This presentation is for informational purposes only and is NOT LEGAL ADVICE. (Lesson 1: Don’t forget the basics.)

4. The Challenge “I know you are all struggling with: social media, and how to keep pace with disclosure and investor protection issues.” June 28, 2011 Richard G. Ketchum,Chairman & Chief Executive Officer

5. The Opportunity “Led by Facebook, Twitter, Global Time Spent on Social Media Sites up 82% Year over Year” ~ nielsonwire Facebook – 750 Million Users ~ TechCrunch Blog readers in the US will reach 122.6 million in 2011 ~ eMarketer LinkedIn tops 100 million accounts ~ LinkedIn Twitter averages 400,000+ new accounts per day Consumers 67% more likely to recommend or buy products from a brand after following it on social networking sites. ~ Chadwik, Martin, Bailey Study

6. Morgan Stanley begins staged, roll-out for Advisors to use Social Media "This will be a significant competitive advantage." Andy Saperstein, COO, National Sales at Morgan Stanley

7. MS to use LinkedIn & Twitter *Burson-Marsteller Fortune 100 Social Media Chart *Regus Twitter icon

8. Even for a leader, social media progress comes slowly

9. FINRA’s 10 Commandments Thou shalt retain all thy tweets and posts Thou shalt apply the “Suitability Rule” Thou shalt adopt policies & procedures for thy tweets & posts recommending specific investment products Thy blog is an “interactive electronic forum” Thou shalt have a principal approve they avatar, profile, design and supervise thy tweets and posts Thou shalt supervise social media communications Thy FAs shalt be trained to tweet and post and not present undue risks to investors Thou shalt respect entanglement & adoption theories Thou shalt have a disclaimer to avoid entanglement by customer or other 3rd party content Thou shalt have guidelines & screen 3rd party postings

10. Putting FINRA’s 10 Rules Into Action

11. I. Thou shalt retain all thy tweets and posts SEC R. 17a-4 Non-rewritable, non-erasable format.

12. Establish In-house or Vendor Archiving and Approval Recording Compliance

13. II. Thou shalt apply the Suitability Rule

14. Disclaimers & Suitability Rule While a broker/dealer cannot disclaim away its suitability obligation, informing customers that generalized information provided is not based on the customer's particular financial situation or needs may help clarify that the information provided is not meant to be a "recommendation" to the customer. 01-23 Suitability Rule And Online Communications

15. III. Thou shalt adopt policies and procedures for thy tweets and posts FINRA offered two “best practice” routes for firms to follow: Prohibition of all interactive electronic communications that recommend a specific investment product and any link to such a recommendation unless a registered principal has previously approved the content. Creation of a database of pre-approved communications/templates for financial advisors to use.

16. Creating a Content Library Employees must be trained to know the opportunities, risks and limits of real-time, social media engagement An authentic, human voice requires original content and communication At the same time, a body of indexed and searchable, pre-approved content should be created to help financial advisors speedily and accurately answer routine inquiries Remember that’s it’s ok to respond with a promise of more information or to take the conversation offline: DM, email, call….

17. What about “chats”? FINRA cautioned: The definition of “public appearance” in NASD Rule 2210 includes unscripted participation in an interactive electronic forum such as a chat room or online seminar. Rule 2210 does not require firms to have a registered principal approve in advance the extemporaneous remarks of personnel who participate in public appearances. However, these interactive electronic forums are subject to other supervisory requirements and to the content requirements of FINRA’s communications rule.

18. Advertisement, Sales Literature, Public Appearance? Static (non-interactive) content on social networking sites and blogs are also deemed to be advertisements. An instant message sent to 25 or more prospective retail customers is considered sales literature. An instant message is considered correspondence if it is sent to: i) a single customer (prospective or existing); and ii) an unlimited number of existing retail customers and/or less than 25 prospective retail customers (firm-wide) within a 30 day period. Password-protected websites are considered sales literature. Real-time interactive or non-static electronic forums including extemporaneous chat room, social networking and blog comments are considered public appearances. *Guide to the Internet for Registered Representatives

19. IV. Thy Blog shalt (probably) constitute an “interactive electronic forum” Rule 2210 Treatment of a blog depends on “the manner and purposes for which the blog has been constructed,” separating blogs between those that simply contain “static” content and those having an “interactive” format. Purely “static” content = “advertisements” and requires prior principal approval. Blogs with commenting = “interactive electronic forum” that does not require prior principal approval, but must be supervised.

20. To Blog or Not to Blog….Leadership Is the content pre-approved or supervised? Is it “fair and balanced”? Does it meet the “suitability” standard? What about comments?

21. V. Thou shalt have a principal approve they avatar, profile, design and supervise thy tweets and posts Can you guess the Twitter newbie, FA, spam?

22. Create Templates for Static Profiles Uniform, professional photograph & branded background with “Important Reminders” Branded, uniformly formatted biography List of approved LinkedIn Groups & streamlined request/guidance process Archive approval

23. VI. Thou shalt supervise social media communications

24. VII. Thy FAs shalt be trained to tweet &post

25. Establish a Social Media Plan Establish a Team with Representation from Marketing, Customer Relations, Legal, HR & IT Determine Short and Long-term Goals Assign Responsibilities and Tasks Create a Content Calendar & Decision Tree Review Crisis Scenarios and Responses Detail Review, Approvals, Compliance, Archiving, Supervision Outline Training, Budget and Staffing

26. Establish A Social Media Policy Social media policy templates abound – and many ignore significant regulatory rulings that create landmines for those who have not stayed attuned to the fast-moving world of social media law Make it readable and plan for it to evolve

27. Provide Training to Employees Social media operates in “real-time” It requires an authentic, human voice Employees must be given the rules, etiquette, techniques, case studies, and hands-on training Learn the tools for efficient participation Best practices should be regularly reviewed Training should include follow-up sessions to review social media engagement and issues There should be a streamlined process of asking questions and getting answers.

28. Provide a Social Media Decision Tree * Pfizer’s adopted from US Air Force

29. What to Tweet about?

30. Tweet Customer Service

31. What to Tweet about?

32. Niche your posts and tweets

33. VIII. Thou shalt respect the entanglement & adoption theories FINRA would consider such a third-party post to be a communication with the public by the firm or its personnel under the entanglement theory if the firm or its personnel paid for or otherwise was involved with the preparation of the content prior to posting. FINRA also would consider a third party post to be a communication with the public by the firm or its personnel under the adoption theory if, after the content is posted, the firm or its personnel explicitly or implicitly endorses or approves the post

34. IX. Thou shalt have a disclaimer to avoid entanglement by customer or 3rd party content Assuming the disclaimer was sufficiently prominent to inform investors of the firm’s position, such a disclaimer would be part of the facts and circumstances that FINRA would consider in an analysis of whether a firm had adopted or become entangled with a posting.

35. Sample Disclaimer:

36. X. Thou shalt have guidelines & screen 3rd party postings

37. Additional FINRA Guidance to Come FINRA plans to soon release to the Securities and Exchange Commission new social media guidelines for broker-dealers and their advisors. FINRA officials have promised, however, that any new guidelines won’t change any of “the fundamental principles” in FINRA’s Regulatory Notice 10-06 What’s ahead?

38. What about Twitter Lists, Linkedin Recommendations, Facebook “Likes” & #FollowFriday?

39. 2nd Most Popular Search Engine Is the content pre-approved Is it “fair and balanced” Does it meet the “suitability” standard What about comments?

41. Can I have a personal social media account just for fun? Sure. Just don’t talk shop! – And be responsible!

42. “The crux of social networking is building relationships…” ~ MSSB Dir. of Social Media “The crux of social networking is building relationships,” said Lauren Boyman, Morgan Stanley Smith Barney’s director of social media. “That’s what financial advisors do, build relationships, build trust with their clients. This is a tool for them to do that in a more effective way.” ~ Financial Times, May 26, 2011

43. Thank you! GlenGilmore@GilmoreBusinessNetwork.com