New Web-based technologies and social networking sites present a big opportunity for financial advisors to connect with clients or potential clients. However, the technology also presents dangers for violations of federal, state and firm rules and regulations, and as such should be used with caution, say financial services legal experts.

Because social networking sites operate in, or near real time, and because they are so easy to use, broker-dealers and financial advisors need to scrutinize their use carefully to make sure that even casual conversation or postings comply with FINRA and SEC regulations for advertisements, correspondence and sales literature, advises Paul A. Lieberman, associate director of litigation at MarketCounsel and managing counsel at Hamburger Law Firm, a boutique firm providing legal counsel for the securities industry.

All communication that relates to an advisor's work needs to be preserved in an easily retrievable form in case of a FINRA or SEC exam, says Daniel A. Bernstein, director of professional services at MarketCounsel and a principal at Hamburger Law Firm.  The easiest way is to send duplicates of all web-based communication conducted on a home computer that has anything to do with firm-related work. Tools exist to categorize these communications, store them, and retrieve them if needed.

The two lawyers offered their advice at a web conference sponsored by the National Association of Independent Broker/Dealers addressing compliance issues for technologies such as LinkedIn, Twitter, blogs, social networking sites and Webinars.

Among issues to be concerned about: Attaching published articles in an email that give appearances the advisor is promoting whatever is in the article. There is also the danger of infringing on the original author's intellectual property rights, Bernstein warns.

"Part of the problem is that advisors do not think of these new technologies as traditional (financial) communication, especially if they are communicating with friends, participating in a webcast or posting their profile on Facebook," Bernstein says. He adds they must be treated as official work product, rather than as casual communication with friends.