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February 03, 2021 at 03:03 PM
The Financial Industry Regulatory Authority is warning broker-dealers to be wary of digital platforms with interactive and “game-like” features, as they could run afoul of the regulator’s Communications With the Public rule when using them.
In its just-released 2021 Examinations and Priorities report — which summarizes exam findings from 2020 — FINRA points out that there was “a surge in new retail investors entering the markets via online brokers” last year.
Some “online broker-dealers’ apps, as well as those offered by other financial services and consumer-oriented businesses, include interactive and ‘game-like’ features, as well as related forms of advertising and marketing,” FINRA explained.
These features “affect many aspects of how firms interact and communicate with customers, from initial advertisements through the opening of accounts, recommendations and the presentation of different investment choices,” it said.
The FINRA report notes that it found broker-dealers that had failed to supervise and maintain policies and procedures for digital communications.
Some BDs, it says, are “not maintaining policies and procedures to reasonably identify and respond to red flags — such as customer complaints, representatives’ email, [outside business activity] OBA reviews or advertising reviews — that registered representatives used impermissible business-related digital communications methods, including texting, messaging, social media, collaboration apps or ‘electronic sales seminars’ in chatrooms.”
Robert Cruz, vice president, Information Governance for technology provider Smarsh, told ThinkAdvisor in an email that “FINRA highlights the need to inspect for outside business activities (OBA), which is significant given the recent news surrounding GameStop.”
