Reports & Studies

In a letter to NASD Chairman and Chief Executive Officer Robert R. Glauber, dated January 15, 2003, former Securities and Exchange Commission (“SEC”) Chairman Harvey L. Pitt requested that NASD, joined by the Securities Industry Association (“SIA”) and the Investment Company Institute (“ICI”), convene a task force to recommend industry-wide changes to address errors and missed opportunities to provide discounts in the calculation of sales loads charged on the purchase of mutual fund shares that carry a front-end sales load.

Fairness, integrity and efficiency make the U.S. capital markets the most successful in the world. In the past decade, more than 5,600 domestic and foreign enterprises raised an aggregate of over $500 billion through IPOs in U.S. markets. These IPOs served as an engine for corporate growth and active participation by all sectors of the investment community, from venture capitalists to large institutions and individual investors.

The Global Settlement followed joint investigations by the regulators into alleged conflicts of interest between investment banking and securities research at brokerage firms.

An increasing portion of investors report that social media content directly impacts their investing decisions, and social media is particularly popular among younger generations of investors.5 Social media platforms may provide a faster and more efficient way to disseminate financial information that is in line with the preferences of younger generations. Social media also has the potential to drive collective action in a broad and impactful manner.6 This was demonstrated in part by the influence of social media on “meme stock” trading activity.7

In addition to the potential benefits and risks and related factors noted above, member firms should also be mindful of the potential implications to their regulatory obligations as they consider whether to use the various social media techniques described in this report.

FINRA’s research highlighted various social media tools that market participants use to influence investment decisions. As discussed in greater detail below, these techniques involve social media communication platforms, sentiment analysis tools and financial product innovations.Social Media Communication Platforms

The growing influence of social media on investing behavior and decision-making can offer, in relevant circumstances, potential benefits for investors, but it also may carry potential risks that should be carefully considered. Certain potential benefits and risks are noted below.Potential Benefits

1 The views and opinions made in this report are those of the authors, and do not represent official views or policies of FINRA. This report does not express any official FINRA legal position and does not create any new regulatory requirements or suggest any change in any existing regulatory obligations, nor does it provide relief from any existing regulatory obligations.