Back in January, FINRA announced some guidelines for brokerages that wanted to get into social networking. The guidance emphasized that firms must develop policies and procedures--in the context of its own business and compliance programs--designed to ensure that it is "complying with all applicable regulatory requirements when using social networking sites."

The guidance also makes clears that recommendations via these sites are governed by suitability requirements. (Is a fiduciary responsibility far behind for some brokerages?)

One might be tempted to ask whether the guidance will end up chilling adoption of Web 2.0 devices, like the use of sites like LinkedIn,Facebook, Twitter, StockTwits and various Wikis, for example. It's fair to say that adoption is still going slowly. Bloomberg reports that 84 percent of U.S. brokerage firm employees polled by HNW said they don't use social media because company and industry regulations make it too burdensome.

There are still a lot of technological hurdles to ensure proper record retention for one thing. And the regulatory burden is extra heavy, as most firms tend to be conservative on suitability issues. Certainly, tweeting out stock picks publically would not be smiled upon.

But all of that said, there's a sense that social networking is an important marketing channel, and more companies are getting their feet wet. Charles Schwab, for example, set up a network for active traders to blog and communicate. Vanguard lets employees access Facebook and LinkedIn as long as investment advice isn't posted. Lots of banks have experimented with blogs.

So, the time to set some policies may be now. For brokerages especially, the marketing imperative is high. Missing this trend would be akin to missing the online investing trend.

For more:
- here's the Bloomberg article

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