FINRA Rule 4530 became effective in July 2011, replacing the former NASD Rule 3070. The rule requires firms to report certain events and items to FINRA. These reports are in addition to any required disclosures that may be needed for a Form U4, U5, or Form BD. FINRA earlier issued Regulatory Notice 11-32 to help firms understand how to implement the new rule and its reporting requirements.
This week, FINRA announced that it has published a list of FAQs relating to Rule 4530. I recommend that those charged with Rule 4530 reporting and compliance review this, as this sets forth the regulator's expectation of how the reports are to be filed, and what type of event requires disclosure. Note that these FAQs are not part of the rule itself, and any conflict between this and the Rule should be decided in accordance with the Rule. But, generally speaking, firms don't like to have to defend why they reported something one way, or failed to report it all together.
One interesting question and answer caught by attention when reviewing the FAQs, and it has to do with text messages and tweets. Here is the question and FINRA's answer:
2.1 Are text messages and tweets received from member firm customers complaining about the member firm or its associated persons subject to reporting under FINRA Rule 4530?Yes. FINRA Rule 4530(a)(1)(B) requires that a member firm report within 30 calendar days after the firm knows or should have known that it or an associated person is the subject of any written customer complaint alleging theft or misappropriation of funds or securities or forgery. FINRA Rule 4530(d) requires that a member firm also report quarterly statistical and summary information regarding written customer complaints that have been received. Received text messages and tweets are in a written format. Thus, a member firm must report text messages and tweets received from firm customers expressing complaints about the firm or its associated persons consistent with the requirements of FINRA Rules 4530(a)(1)(B) and 4530(d). For example, if a firm customer sends a tweet to the firm alleging that an associated person sold him unsuitable securities, the firm must report it pursuant to FINRA Rule 4530(d).
Text messages I get, but tweets? Some might argue that tweeting a complaint or other message is really more of a way to vent about something than to actually engage in some type of meaningful correspondence outlining a complaint and an expected resolution or request. After all, the communication is limited to 140 characters, unless it is a message sent through a DM (direct message). But the regulator has spoken and advised us of their expectation. It will be interesting to see how the first exam looking into reporting of "complaint tweets", and any proposed enforcement action, unfolds. As they say, "Forewarned is forearmed."