The Financial Industry Regulatory Authority, as the securities industry’s regulator, is on the lookout for new and creative ways for brokers to get themselves and their firms in trouble. First it was email. And lawyers had a field day with whether or not email constituted correspondence or simply a “communication”. Systems were developed, along with rules, to supervise email.
The World Wide Web came along with email. Obviously this was a form of advertising, but how was it going to be regulated by FINRA and supervised by the firms?
The next hole in the dike was Instant Messaging. How could a firm supervise that? Thanks to “open architecture”, certain IM systems could be used and supervised.
One alternative is to ban the use of social media altogether. That would be a nice try, but I doubt it would be effective. Another is to regulate it and supervise it. this is the route that they will need to follow. FINRA is offering a webinar (how fitting) on social media.
There are some interesting questions here. If a broker is friendly with a client before the client relationship existed, what communications need to be supervised? How about if the client and broker become friends after the relationship is formed? I know that, in my representation of brokers, they frequently develop client relationships with people they like. This is what we called a “slippery slope” in law school. In other words, where does the line get drawn? We’ll see.
That’s the view of one lawyer from Jupiter, Palm Beach County, Florida. My name is Marc Dobin.