Richard Ketchum, the chief executive of the Financial Industry Regulatory Authority (FINRA), said on Wednesday that the financial regulators are facing serious challenges posed by social networking sites as more and more businesses express their desire to communicate with their customers through Facebook and LinkedIn websites.

The problem of such communication is that the design of social networking sites may not allow firms to keep the kind of archives of their employees' business communications required by regulators. Therefore many companies ban their employees to use sites like Facebook to do their business as such services undermine firms’ ability to meet the supervision and record-keeping requirements.

"Nevertheless, interest in these sites is inevitable and will not go unabated," he said.

FINRA has set up a task force comprised of industry representatives "to explore how regulation can embrace technology advancements in ways that can improve the flow of information between firms and their customers without compromising investor protection," he said.