A registered representative (RR) has a client who is very active on social media and frequently posts about their investment successes, often tagging the RR and the firm. The client's posts sometimes include specific dollar amounts of gains. What is the RR's most appropriate action regarding these client testimonials on social media?
- AMonitor the posts but take no action, as they are client-generated and not official firm communications.
- BLike and share the client's positive posts to amplify the firm's positive image.
- CEncourage the client to continue posting, as it serves as free advertising for the RR and the firm.
- DInform the client that such posts are considered testimonials and may violate FINRA rules if not properly supervised and disclaimed.
Show answer & explanationAnswer & explanation
Correct answer: D. Inform the client that such posts are considered testimonials and may violate FINRA rules if not properly supervised and disclaimed.
FINRA Rule 2210 (Communications with the Public) has strict rules regarding testimonials, even if client-generated. Such posts must be reviewed, approved, and typically require specific disclaimers. The RR has an obligation to address this with the client to ensure compliance and avoid misleading other potential investors.
Why the other options are wrong
- A. Ignoring client-generated content that falls under testimonial rules is a compliance failure; firms and RRs are responsible for supervising such content.
- B. Liking or sharing client posts makes them 'adopted' by the firm/RR, subjecting them fully to FINRA advertising rules, which would be violated without proper disclaimers and supervision.
- C. Encouraging such posts without proper supervision and disclaimers would be a serious FINRA violation.
Social Media Testimonials (FINRA Rule 2210)
FINRA Rule 2210 has strict requirements for testimonials in communications with the public, including social media. Even client-generated content can be considered a testimonial if adopted or used by the firm/RR. They typically require pre-approval, specific disclosures, and must not be misleading.
- Testimonials can be client-generated.
- Must be fair, balanced, and not misleading.
- Requires specific disclosures and disclaimers (e.g., not indicative of future results).
- Often requires firm pre-approval if 'adopted' or used by RR/firm.
Memory trick: Client Praises? Check the Rules, Testimonials Aren't Foolproof Tools.