Popular social media channels like Twitter and Facebook have seen a sharp increase in use by businesses in the last few years. According to a survey by Regus, a whopping 43% of firms are successfully using social media to gain new customers. Sounds like an enticing offer, right? Low cost set up and maintenance of social media websites is a seemingly small price to pay in exchange for a firm’s ability to connect with, engage, and inform potential and existing customers. Many businesses have utilized social media successfully with minimal barriers or consequences; however; the financial services industry is slightly stricter in regards to social media usage.
The Financial Industry Regulatory Authority (FINRA) is responsible for investment advertising and communications output. Last year, the self-regulatory agency released an overview of their guidelines, which can be seen in full here. Though FINRA does not create very specific, industry wide standards in regard to social media or blogging, it does answer some frequently asked questions about the subjects. Additionally, one section of the overview broadly states, “firms must adopt policies and procedures reasonably designed to ensure that their associated persons who participate in social media sites for business purposes are appropriately supervised, have the necessary training and background to engage in such activities, and do not present undue risks to investors. Firms must have a general policy prohibiting any associated person from engaging in business communications in a social media site that is not subject to the firm’s supervision.”
The need for a social-media policy in every adviser’s compliance manual has been growing very quickly over the past decade. Social media channels have become not only common for professional application within financial services, but also a necessary part of our personal and business lives. Regulators will eventually get around to providing specific guidance in regards to social media, though you shouldn’t hold your breath in anticipation. It took about 8 years for official policies in regards to use of websites.
In lieu of the slow response time of regulatory agencies, providers of compliance and archiving systems are taking matters into their own hands. Companies like Arkovi are creating archiving and compliance systems for broker-dealers, and financial advisory firms. The systems are able to constantly monitor and save all social media and email content. Additionally, analytics and content dashboards are included for managing web, blog and social presence in real time. Once archived, the content can be accessed and searched by the Chief Compliance Officer for auditing or compliance mandates. Arkovi has also created a free Social Media Policy Template for Registered Investment Advisers.
Financial Services firms and Registered Investment Advisers need to take action quickly in regards to social media compliance. Company protection and risk management are at stake, but so are long-term growth and business development opportunities. Social media is the new way that people and businesses communicate, and it is the role of progressive individuals and firms to adapt to this new paradigm, and capitalize on opportunities for increased engagement and long term growth.