BACK TO: Blogs, Rogge Dunn

Social Media Scrutiny Continue Education Testing Tip and More

SOCIAL MEDIA’S influence on consumers and investors continues to expand even though social gatherings have picked up as the pandemic has receded. Prospecting for clients through social media is an effective augmentation to using traditional methods of sources of influence, charity events, and other civic gatherings.

SOCIAL MEDIA SCRUTINY

Many investors now research financial advisors online and through LinkedIn and various other social media platforms. Recognizing this trend in investor preference, in September of 2021 FINRA began a dedicated program to investigate firm’s policies and procedures to ensure financial advisors did not violate FINRA rules regarding acquisition of new clients through social media.

In February FINRA issued an update on its targeted examination of FAs’
use of social media and social media influencers as a tool for client acquisition. While FINRA’s “sweep” is targeted towards firms, FAs need to be mindful that FINRA’s investigation of a firm can uncover improper use of social media by individual FAs – which can cost them their jobs and severely tarnish their U-5s. It’s a good reminder that FAs should know and follow their firm’s social media policy. In February FINRA announced a $5,000 fine and 10 day suspension of an FA who made posts on a social media page that violated FINRA’s rules regard- ing communications with the public.

The broker’s post made positive statements about the returns realized in an investment club and hedge fund, but did not discuss any of the risks associated with these investments. The FA also made posts about the benefits of options transactions but did not warn that options investments is not suitable for all investors.

The FA ran afoul of FINRA rules because he went beyond general descriptions of the benefits of options and described in detail specific transactions prior to disclosing or delivering documents disclosing the risk of options. The FA also got in trouble because he did not obtain advance approval from FINRA’s advertisement and regulation department at least ten days prior to making those posts.

The takeaway is that social media is a valuable prospecting tool that is here to stay. Before making posts discussing investments, those posts should be cleared with FINRA’s advertising department to protect the advisor as well as the firm that employs them.

BE CAREFUL WHEN PRESENTING PPMS

FINRA fined an FA $7,500 and suspended him for one month because he solicited prospective investors into a private placement before the FA had a substantial relationship with the prospective investors. The FA made a mistake because neither he nor his firm had any substantive relationship with any of the prospective investors and the FA did not obtain investor questionnaires prior to the time the investors invested in the private offering.

CONTINUING EDUCATION TESTING TIP

FINRA came down hard on an FA who took the Series 7 examination remotely. The rules required all test takers to store all personal items including study materials and electronic devices outside of the testing location. During the exam, the FA had personal items in the test room including study materials and an electronic tablet.

While there was no evidence the FA used the study materials or electronic device to cheat, the fact that those materials were in the room despite instructions prohibiting him from having them in his possession led to a massive penalty. Specifically, FINRA suspended him for 18 months and fined him $5,000.

The takeaway is that any issues or violations involving honesty, integrity, or cheating generally leads to substantial enforcement penalties from FINRA.

MEDIA

Why Wall Street’s biggest wealth managers could face an avalanche of lawsuits thanks to one judge’s ruling
READ MORE
FDA Concedes COVID Shots Trigger Baby Seizures, Re-Recommends Them Anyway
READ MORE
Executive Travel: Deer Valley in Park City, Utah
READ MORE
The Importance Of Giving Back To Community: What Drives Rogge Dunn Group To Improve And Provide Professional Services
READ MORE
LOANDEPOT, CARDINAL SUED OVER ALLEGED DECEPTIVE PRACTICES
READ MORE
HONORING OUR NATION’S HEROES
READ MORE
The Importance of Being Earnest
READ MORE
KEY INDUSTRY DEVELOPMENTS IN MARCH
READ MORE
Social Media Scrutiny Continue Education Testing Tip and More
READ MORE
Several Developments in January are of Interest to Financial Advisors
READ MORE
Rogge’s Roundup: Several developments in January are of interest to financial advisors — February 16, 2023
READ MORE
Rogge’s Roundup: Social Media Scrutiny, Continuing Education Testing Tip and more – March 15, 2023
READ MORE
Rogge’s Roundup – Key Industry Developments in March
READ MORE
Rogge Dunn Group Relaxes, Ramps Up Team Building During Cancun Weekend
READ MORE
$1.75 million settlement finalized in lawsuit against Collin DA, top county officials
READ MORE
Stifel’s Raiding Suit Against RIA Adds to Pile of High-Stakes Claims
READ MORE

Contact Us Today!

Contact us to learn how we can help answer your legal questions.

FILL OUT FORM