State Social Media Privacy Legislation Now an Issue for Securities Regulators

The Financial Services Institute, which represents individual financial services firms and individual financial advisors, warned that 70 social media bills introduced throughout the U.S. could conflict with Finra advisor regulations.

An article in Financial Advisor magazine said that a spokesman for the North American Securities Administrators Association expressed concern that privacy provisions in the bills might interfere with supervisory and record-keeping responsibilities of advisors under state and federal securities laws and regulations.

Recall that many states have started to pass legislation restricting employers’ ability to acquire employee passwords or gain other means of access to employee social media accounts.  In his Financial Advisor article, Ted Knutson reports that Finra has been in contact with 12 states about the legislation. In the organization’s letter to the Colorado legislature, it noted that “the objective may be accomplished through a specific exemption for broker-dealers whose employees use a personal account or service for business communications.”

While courts continue to deal with the ongoing challenge of applying traditional legal doctrine to social media platforms, it is also worth noting how regulators must now contemplate not only social media itself but the way both current and future laws passed in response to social media will impact their own regulations.