The Investment Industry Regulatory Organization of Canada (IIROC), a self-regulatory organization that oversees all investment dealers and trading activity on debt and equity marketplaces in Canada, has proposed new guidelines to govern how investment dealers advertise and communicate with clients on popular social media platforms (e.g. Facebook, Twitter, blogs, etc.).
These changes have been presented as a draft, and the IIROC is asking dealer members for input before the new rules are set. All comments must be submitted by April 8, 2011.
What the IIROC is Proposing:
- Regulatory requirements and securities legislation must be adhered to even when posting something to social media platforms
- Messages posted through social media may be conveyed as advertising, depending on the content. Financial advertising regulations and supervisions will apply
- Dealer members must keep records of all communications and “maintain transaction-related documents entered on behalf of each client” per Section 11.5(2) of NI 31-103
- From the same source as above: “Any advertising, sales literature or correspondence used to solicit clients that contains performance reports or summaries must be pre-approved.”
- Exercise caution when allowing comments or posts from a third party, as they may be considered to be endorsed by a “dealer member,” which would force compliance with the rules and regulations
What This May Mean for Financial Services:
- May not be used for transactional discussions
- May not be used to give individual advice
- Channel selection (one-way or two-way conversation) is important
- Rules differ between Canada and the U.S.
- Like all communications, disclosure and common sense apply
- Will work for financial services
Why Social Media Matters:
Neilson Research reports that 22% of all time online is spent on social media platforms – an increase of 66% from last year.
Whether or not you use social media channels today, you likely will in the near future. As such, it is important to become part of the discussion, as these new regulations will govern the way you communicate down the road.
What Happens Next:
This is an important development in financial services, one of the more heavily regulated industries in Canada.
As financial advisors and dealers alike will look to participate responsibly in these channels, you should carefully review the Draft Guidance Notice MR0281. Become familiar with them and make a submission to their review process before April 8, 2011.
Make sure to participate in the commenting process! Your questions and comments on this draft regulation will help ensure that social media channels can be used appropriately and effectively to communicate with clients. Social media channels are here to stay and it is important that financial services industry come to a consensus on their use.