Everyone’s use of social media has increased in the past five years, and independent financial advisors are no exception. As advisors have begun to use Facebook, Twitter, LinkedIn and other platforms to grow their businesses and connect with investors, proposals to regulate these interactions have also increased. There is social media legislation pending in nearly every state. Some highlights are below:
- North Dakota: Recent North Dakota legislation, H.B. 1455, would prevent broker-dealers and financial advisors from remaining compliant with social media regulations set forth by FINRA.
- Rhode Island: Proposed bills H.B. 5255 and S.B. 493 conflict with compliance requirements found in FINRA regulatory rules 2210 and 3010, respectively.
- Oregon: State Senator Bruce Starr (R-15) proposed S.B. 499, which conflicts with compliance requirements found in FINRA regulatory rules 2210 and 3010.
If you noticed a trend with the bills above, the main issue is that provisions within these bills conflict with current rules set forth by FINRA regarding client communications and social media use. One difficult aspect for advisors is when these types of regulations overlap and conflict; the differing rules unnecessarily open broker-dealers and financial advisors to penalties at both the federal and state levels.
When it comes to social media, an effective mode of customer outreach, increased liability for advisors due to conflicting rules could lead broker-dealers to ban its use altogether. This would stifle a growing communication vehicle for the industry to both connect with current clients and expand their businesses. At a time when succession in the industry is a growing concern, a recent survey by Fidelity Investments noted that approximately 34% of investors between the ages of 21 and 47 said it was important for their advisors to have a social media presence, but due to compliance issues and other factors, far less than that number use social media. View a state-by-state map with more individual details selected state’s legislation to learn more about these issues.