© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

Digital Communications Wednesday, November 7 3:15 p.m. – 4:15 p.m. FINRA and industry experts discuss the guidance provided in FINRA Regulatory Notice 17-18. Panelists address how firms have implemented the guidance, effective practices, compliance considerations and developments in the use of digital technology. The panel also looks at archiving, engaging vendors and texting.

Moderator: Amy Sochard Senior Director FINRA Advertising Regulation Panelists: Sheelagh Howett Chief Risk Officer Cantella & Co., Inc. Chris LeVasseur Associate District Director, Sales Practice FINRA Los Angeles District Office Harry Striplin Chief Compliance Officer Umpqua Investments, Inc.

© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2

Digital Communications Panelist Bios: Moderator: Amy C. Sochard is Senior Director in FINRA’s Advertising Regulation Department. The department protects investors by ensuring broker-dealer members of FINRA use advertisements and other sales communications that are fair, balanced and not misleading. Ms. Sochard leads the department’s complex and targeted review activities. She also serves as liaison to FINRA departments involved in examinations, including the departments of Enforcement and Member Regulation. In addition, Ms. Sochard oversees staff dedicated to the routine review of communications filed with the department by broker-dealers. Ms. Sochard assists in the development of rules and interpretations for communications with the public and social media, and she routinely speaks at industry events on these topics. Prior to joining FINRA’s predecessor (NASD), Ms. Sochard worked with a real estate syndication firm in Washington, DC. She received a bachelor’s degree with distinction in English from the University of Virginia and studied poetry writing at Columbia University. Panelists: Sheelagh Howett is Chief Risk Officer at Cantella & Co., Inc. She is on the Board of Directors and shares leadership responsibility with the executive management team for overseeing the growth and success of the firm. She focuses on keeping clear and regular communication between business units and compliance within the firm. She strongly believes that risk is an enterprise-wide responsibility and has created a risk-aware culture including an understanding that risk prevention is everyone’s job. She continually works to further develop risk-management processes to identify, assess, and respond to the inevitable risks that face our industry. At the same time, she works to improve the efficiency and integration of existing processes into daily routines so they become ingrained in the firm's business. Ms. Howett is an active member of the Greater Boston Chamber of Commerce, the New England Broker/Dealer Investment Advisor Association, and the Women in Pensions Network. Originally from Ireland, Ms. Howett earned a BA in Banking and Finance at University College in Dublin. She holds FINRA Series 7 and 24 licenses. Chris LeVasseur is Associate Director of the FINRA Los Angeles District Office where he is responsible for managing the District Office’s regulatory programs. Mr. LeVasseur has been with FINRA/NASD since 1996 and was previously an Examination Manager in the Los Angeles and San Francisco District Offices. Mr. LeVasseur is designated as a Certified Regulatory and Compliance Professional™ by the FINRA Institute at Wharton. Mr. LeVasseur graduated with a Bachelor of Arts degree in Economics and Psychology from Lafayette College and a Masters of Business Administration degree from National University. Harry Striplin is Chief Compliance Officer for Umpqua Investments, Inc., a small firm headquartered in Portland, Oregon. He has been with Umpqua Investments for nine years. Mr. Striplin has more than 36 years of experience working at small firms and more than 27 years serving as a Chief Compliance Officer in the small firm environment. He has served as a member of FINRA’s District 3 Committee, the Securities Industry Regulatory Council on Continuing Education and has been a panelist at FINRA securities conferences. Mr. Striplin has been a member of the Securities Industry Continuing Education Content Committee for more than 20 years. Mr. Striplin serves as an arbitrator for FINRA Dispute Resolutions and has achieved his Certified Regulatory and Compliance Professional™ (CRCP™) certification through the FINRA Institute at Wharton.

2018 Small Firm Conference

November 7-8, 2018 | Santa Monica, CA

Digital Communications

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Moderator

Amy Sochard, Senior Director, FINRA Advertising Regulation

Panelists

Sheelagh Howett, Chief Risk Officer, Cantella & Co., Inc.

Chris LeVasseur, Associate District Director, Sales Practice,

FINRA Los Angeles District Office

Harry Striplin, Chief Compliance Officer, Umpqua Investments,

Inc.

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Panelists

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Under the “Schedule” icon on the home screen,

Select the day,

Choose the Digital Communications session,

Click on the polling icon:

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To Access Polling

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

1. | Definition of Digital Communications

2. | Recordkeeping

3. | Supervision

4. | Hyperlinks and Sharing

5. | Testimonials and Endorsements

6. | Complexity and Future Challenges

AGENDA

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

What are some examples of digital communications?

Websites, Banner Ads, and Search Ads

Social Media Accounts Used for Business

Ads Placed on Social Media

Email

Instant Messages, Text Messages and App Message Services

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Digital Communications Defined

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

1. What is your biggest area of concern in Digital

Communications?

a. Record Retention

b. Supervision

c. Content

d. Data Privacy and Protection

e. Cybersecurity

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Polling Question 1

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Recordkeeping

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Firms must preserve for at least three years records of

communications related to their “business as such”

as required by SEC Rules 17a-3 and 17a-4 and FINRA

Rule 4511.

“Business as such” is determined by the content of

the communication, not the device, technology,

platform or ownership of the account.

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Recordkeeping Responsibilities

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Every firm that intends to

communicate, or permit its

associated persons to

communicate regarding its

business through a messaging

app or service must ensure it

can retain records as required

by the rules.

Messaging: Regulatory Notice 17-18

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

What makes a good vendor?

Challenges

Cost effective

Usability

User buy-in

Band-width beyond email

Recordkeeping linked content

Recordkeeping Considerations

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

2. Which of the following message types does your firm

permit for business use either internally or with

customers?

a. Instant Messages

b. Text Messages

c. Mobile App Message Services

Polling Question 2

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

3. How does your firm supervise digital communications including email and social media?

a. We have internal staff who monitor for, identify and review new email accounts as well as new social media accounts and posts.

b. We have outsourced this task.

c. We use automated alerts that notify us of new content when it is posted, such as new social media accounts.

d. We prohibit participation in digital communications beyond websites and other pre-approved content.

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Polling Question 3

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

FINRA Rule 2210 establishes different supervisory standards for static versus interactive retail communications.

Static Content such as websites, banner ads, blogs or social media profile information may require both approval of a registered principal prior to use and filing with FINRA.

Interactive Content such as status updates or comments on a blog may be supervised flexibly in accordance with firm’s written supervisory procedures, and is not subject to the filing requirements.

Static vs. Interactive

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

A registered principal must review and approve prior to use most static content posted on the web or in social media.

The rules permit flexible supervision (e.g., sampling, post-use reviews) for interactive content and correspondence.

Correspondence is defined as communications used with 25 or fewer retail investors in a 30 day period.

FINRA has advised firms to approve social media sites for business prior to use and only if a principal has determined the registered representative can and will comply with applicable rules.

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Supervision Reminders

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Email

Lexicons

Personal accounts

Searches

Messages

Instant Messages

Text Messages

Mobile App Message Services

Compliance Approaches

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2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

By linking to or sharing specific content posted by a

3rd-party, a firm has adopted the specific content and

must ensure it complies with the communications

rules.

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Hyperlinks and Sharing: Regulatory Notice 17-18

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Linked content may contain its own links (“secondary

links”). A firm is not responsible for the content

available through such secondary links provided:

The firm has no influence or control over content accessed

through the secondary links; and,

The original linked content is not merely a vehicle for

secondary links or did not rely completely on the information

available at the secondary links.

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Secondary Hyperlinks: Regulatory Notice 17-18

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

In a digital personal communication an associated

person may share or link to content that the firm

makes available that does not concern the firm’s

products or services without subjecting the

communication to FINRA Rule 2210.

Content Examples: information about the firm’s sponsorship of

a charitable event, a human interest article, an employment

opportunity, or employer information covered by state or

federal fair employment laws.

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Personal Communications: Regulatory Notice 17-18

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved.

Unsolicited 3rd-party comments on a firm’s social

media account generally are not deemed the firm’s

communication.

However, liking or sharing favorable comments will be

deemed adoption of the comments by the firm.

Testimonial disclosures

Advisers Act considerations

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Testimonials & Endorsements: Regulatory Notice 17-18

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Complexity and Future Challenges

• What’s on the horizon?

2018 FINRA Small Firm Conference | © 2018 FINRA. All rights reserved. 20

© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 1

Digital Communications Wednesday, November 7 3:15 p.m. – 4:15 p.m.

Resources

FINRA Resources

Regulatory Notice 17-18: Social Media and Digital Communications, Guidance on Social Networking Websites and Business Communications (April 2017)

www.finra.org/sites/default/files/notice_doc_file_ref/Regulatory-Notice-17-18.pdf

Regulatory Notice 15-50: SEC Approves Rule Requiring Members’ Websites to Include a Readily Apparent Reference and Hyperlink to BrokerCheck (December 2015)

www.finra.org/sites/default/files/Notice_Regulatory_15-50.pdf

Regulatory Notice 11-39: Social Media Websites and the Use of Personal Devices for Business Communications (August 2011)

www.finra.org/sites/default/files/NoticeDocument/p124186.pdf

Regulatory Notice 10-06: Guidance on Blogs and Social Networking Web Sites (January 2010)

www.finra.org/sites/default/files/NoticeDocument/p120779.pdf

Securities and Exchange Commission

Office of Compliance Inspections Examinations Webpage

www.sec.gov/ocie

National Exam Program Risk Alert, Volume IV, Issue 5, August 7, 2017: Observations From Cybersecurity Examinations

www.sec.gov/files/observations-from-cybersecurity-examinations.pdf

IM Guidance Update, March 2014, No. 2014-04: Guidance on the Testimonial Rule and Social Media

www.sec.gov/investment/im-guidance-2014-04.pdf

© 2018 Financial Industry Regulatory Authority, Inc. All rights reserved. 2

IM Guidance Update, March 2013, No. 2013-01: Filing Requirements for Certain Electronic Communications

www.sec.gov/divisions/investment/guidance/im-guidance-update-filing-requirements-for-certain-electronic-communications.pdf

SEC Release Nos. 34-58288; IC-28351, Commission Guidance on the Use of Company Web Sites (August 7, 2008)

www.sec.gov/rules/interp/2008/34-58288.pdf

SEC Release No. 34-47806, Electronic Storage of Broker-Dealer Records (May 12, 2003)

www.sec.gov/rules/interp/34-47806.htm

Federal Trade Commission (FTC)

Native Advertising: A Guide for Business (December 22, 2015)

www.ftc.gov/tips-advice/business-center/guidance/native-advertising-guide-businesses

Commission Enforcement Policy Statement on Deceptively Formatted Advertisements (December 22, 2015)

www.ftc.gov/system/files/documents/public_statements/896923/151222deceptiveenforcement.pdf

.com Disclosures, How to Make Effective Disclosures in Digital Advertising (March 2013)

www.ftc.gov/os/2013/03/130312dotcomdisclosures.pdf

Municipal Securities Rulemaking Board (MSRB)

MSRB Notice 2018-19, Request for Comment on Draft Frequently Asked Questions Regarding Use of Social Media under MSRB Advertising Rules (August 2018)

www.msrb.org/~/media/Files/Regulatory-Notices/RFCs/2018-19.ashx?

MSRB Notice 2018-08, SEC Approves Advertising Rule Changes for Dealers and Municipal Advisors (May 2018)

www.msrb.org/~/media/Files/Regulatory-Notices/Announcements/2018-08.ashx?