July 18, 2011
Still Figuring Out Twitter in the Financial Sector
The Dealbook reports that the Financial Regulatory Authority (Finra), recently announced the one-year suspension of broker (plus a $10,000 fine) who sent “misrepresentative and unbalanced” messages on Twitter. This case sounds like it had a lot more going on, including the broker failing to disclose a number of significant things to the employer, but it once again points out that we still have a lot to figure out with social media in the financial sector (and most other places, for that matter).
It seems to me that it should be pretty clear that any financial advice obtained via Twitter is going to lack some disclosures. If someone is using a post on Twitter as the only reason to buy or sell a stock, I'm not sure there is a whole lot we can do for that investor. That doesn't mean we don't need some ground rules, but people don't need to freak out, either. It's not Twitter that makes brokers play fast and loose any more than it does politicians. It simply provides quick and accessible evidence, and perhaps we should appreciate that more than we do.
[b]ut so can a letter to an editor in your local newspaper, or a notable call to a radio talk show or causing a scene at a presentation.
You don’t see advice that we ought to cut off mail service, or remove phones from employees’ offices, or stop allowing employees to attend seminars and presentations. Rather, we outline a set of expectations as to what is proper business behavior and what is expected by the employer.
And yet, cutting off access to Twitter is exactly what some have suggested. Such a blanket suggestion ignores the usefulness of this internet tool and is not consistent with the approach that companies use for other, more established forms of communication. (Can you imagine a company now that required letters to be faxed instead of e-mailed?)
Now, perhaps using faxes would have helped protect Congressman Weiner from himself, but I rather doubt it. The same is true for employer and investors.
In the meantime, Finra provides this Guide to the Internet for Registered Representatives. It is not especially clear how one should use social media, and it seems to group a number of social media together in a way that doesn't appreciate the different powers of the varying options, but these are the rules. And even when rules are dumb, if it relates to your livelihood, it's best to follow them.