Unlikely Friendship: Social Media and Compliance

Mar 26, 2015

Posted on March 24, 2015Miguel Rodriguez

Part 1 of 3 in Advent's Social Media series.

Social media. The right policy coupled with the right technology can bring significant success to your firm. By knowing the ins and outs of social media, potential risks, and best practices, in congruence with regulatory requirements, you can realize significant growth for your business, particularly in that coveted millennial demographic.

I understand the hesitation and fears around taking your firm social, particularly while navigating the increasing regulatory environment of the financial industry. So let’s look at the challenges that could face your firm as a social business, how to overcome them, and how you can realize the value of going social.

First and foremost, you should strengthen your corporate governance by defining your own policies. Make sure that both firm policies and regulations set by FINRA, the SEC, and the FFIEC are known and practiced company-wide.

Tasked with protecting the public, investors, and financial institutions, the SEC, FFIEC, and FINRA have each outlined regulations and notices pertaining to social media and compliance. As FINRA contains the most detailed of the three, we have highlighted the five essential areas of note for firms looking to develop their social media strategies.

  1. Record-keeping: If you type it out, it’s “written”
  • You are already required to capture and archive all business communications from day-to-day operations of your firm. The same applies for social media. All communications must be recorded and we’re talking everything, no exceptions: tweets, Facebook posts, LinkedIn updates, InMail, Direct Messages, third party content, advertising—even those on employee’s personal devices.
  1. Testimonials: Avoid Endorsements
  • Testimonials are prohibited for investment advisors in the financial industry and must be qualified for Registered Representatives (RRs). These could include “Recommendations” and “Skills” on LinkedIn, “Retweets” on Twitter and “Likes” on Facebook.
  1. Suitability: “Know Your Customer”
  • On social media, it’s nearly impossible to know the investing criteria about all your followers, thus it is prohibited to offer recommendations or advice for investing.
  1. Advertising: Nothing is new for social media
  • When it comes to advertising, all existing advertising rules for traditional media apply to social media as well.
  1. Supervision: Review and Pre-approve
  • Be crystal clear on what your firm allows and does not allow on social media. Put policies in place to govern such rules.

Feeling a little overwhelmed? Not to worry! It’s important to be aware of the relevant regulations, but it’s actually quite simple to get started on social networks. So keep your eye on the prize and let us guide you along.

Social media channels can provide numerous opportunities for growth and success of your business. Merely “listening” on social media by paying attention to what your audience is talking about and posting, can bring in new prospects, leads, and even result in new deals. Leveraging social media enables you to reach new audiences all from the comfort of your desk.

Check back in two weeks for Part 2: how to attract the next generation of clients with social media. Later, I’ll also discuss how to build customer relationships and retain top talent via social networks.

Miguel Rodriguez leads Advent’s social media program. In his role, Miguel is responsible for Advent’s social presence including Twitter, Facebook, LinkedIn, YouTube, and Advent’s blog. Follow Miguel on Twitter.


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