IIROC guidelines meet Web 2.0

Canadian brokers have received an early gift this year: clarity in the regulations covering their use of social media.

IIROC has issues a next set of guidelines for registrants’ communications, including the use of social media. The new rules came into effect December 7, 2011 and replace the now quite dated guidelines from April 2004.

The old rules “focused on the nature of various communications and not on the methods by which such communications are disseminated,” the IIROC notice explains. “However, the available methods of communication have changed significantly with the increasing use of social media websites, such as Facebook, Twitter, YouTube, blogs, and chat rooms.”

First among the guidelines is that dealers must provide clear and comprehensive definitions to their staff of what constitutes advertising, sales literature and correspondence. IIROC points out that the delivery method for these materials is largely irrelevant, as it is their content that must be regulated.

For example, a password-protected website designed to be accessible only to existing clients may not be considered a venue for advertising, since the users are already clients. But some of the materials that are accessible on that site may well fall under the definition of “sales literature”.

“Regardless of the method by which communication takes place, and however social media websites evolve, Dealer Members must ensure compliance with applicable regulatory requirements and securities legislation,” the notice says.

E-mail sent to multiple clients would generally fall within the definition of sales literature unless the communication includes a recommendation with respect to a security or trading strategy, in which case it would fall under the regulations governing suitability and recommendations.

As always, when electronic communications offer a recommendation, it must take into account the suitability of that recommendation for the individual client receiving it.

“At the very least, Dealer Members should implement measures to monitor and/or prohibit electronic communications that constitute a recommendation which must comply with IIROC’s suitability rules,” the guidelines say.

General market and economic commentaries do not fall within the definition of advertising or sales literature, provided they do not cross the line into advertising or general sales literature, and dealers must ensure that their staff are trained to know where that line is.

Read: Guidelines for the review, supervision and retention of advertisements, sales literature and correspondence

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.