FINRA Webinar Summary: Implementing Compliance Practices for Social Media

For those of you that weren’t able to attend, we live-tweeted this afternoon’s webinar and the full summary is available below. The webinar itself was geared at further answering questions around Notice 10-06. Here is FINRA’s description of the session:

“This program addresses implementation of new guidance that FINRA recently issued in Regulatory Notice 10-06, concerning social media. FINRA staff and industry practitioners offer practical guidance on how to monitor and supervise social networking sites.”

Once again if you participated in last month’s webinar (here is a full summary of that session), read Notice 10-06 or downloaded our Companion Guide to FINRA/SEC Social Networking Compliance, you didn’t miss too much. The participants asked a number of questions to help further clarify a few issues. In addition, panelist like Joanne Rodgers, a Vice President of Compliance at New York Life, shared her recent experiences around their social networking compliance pilot.

Without further ado here are all of my live tweets that I posted during the session. If you are going to scan the posts (there are over 70) be sure to pay attention to the bolded ones. There are some great nuggets here. You can also check out other references to the hastag #FINRASN which tracks social networking posts related to FINRA.

As always, feel free to follow me on Twitter and send me any questions you have.

• Panelists include: Doug Preston, Senior VP and Compliance exec from BofA/Merrill Lynch
• Joanne Rodgers, VP of Compliance at New York Life and Joe Savage,  VP in FINRA’s Investment Companies Regulation Department
• Notice 10-06 was designed to cover business use of social media, addresses 5 key topic areas
• Recordkeeping: firms must keep records of participation or use in social media (same as email or IM)
• Recordkeeping: may not be easy to capture this content, aware of vendors (like Socialware) that can automate this
• Q: acceptable formats for social media archiving? Some firms filing tweets to FINRA, PDF’s have been submitted to date
• Suitability: Must be careful of recommendations on social media, refer to existing guidance for this matter
• Suitability: be careful not to mention specific funds or securities, firms should have a policy to address this
• Types of forums: content posted on site generally treated as advertisement, must be pre-approved
• However, interactive content is not required to be pre-approved. Blog posts are generally ads, adding comments makes it interactive
• Wall posts on Twitter or Facebook are interactive and do not require pre-approval
• Supervision: social media must be supervised, either in a pre-approval or post-approval method, use appropriate risk based methods
• 3rd party posts: firms may be responsible if they become entangled or endorse the post of a 3rd party
• Q: Is the Notice considered a rule? No. It is simply additional guidance. It may lead to new rule making around advertisements
• Q: Can you violate a Notice? No. You have to violate a rule but this guidance is still important
• Q: Can you selectively remove 3rd party comments and leave others? Does that imply an endorsement? No.
• Moving to panelists from the firms. Let’s discuss the different types of social media and is it right for you?
• Doug – social media includes wiki, forums, Facebook, LinkedIn, Twitter, YouTube, document sharing, social spaces (2nd Life)
• Doug – a website that only posts information is not a social space, it must be designed to share content between users
• Doug – Facebook has 400mm users, LinkedIn has 60mm, there are 50mm tweets each day, MySpace has 300K new sign-ups each day
• Doug - if access is permitted the activity must be retained and monitored by the firm, conduct ongoing analysis of the tools
• Joanne – we had to consider the size and structure of our firm, many agents are decentralized, manual process wouldn’t work
• Joanne – doing a pilot to help us automatically comply with the regulations, field force & recruiters anxious to get involved
• Joanne – looking at developing best practices and field templates, but agents will want their own touch, must be personalized
• Q: are their growth opportunities through social media? No hard data yet, a lot of calls to arm from sales, responding in kind
• Joanne – we believe there is consumer expectation but also need to be careful that we don’t cross the line
• Joanne – see opportunity for lead generation for new business and for recruiting new agents, LinkedIn ideal
• Joanne – we had success recruiting new agents as part of our pilot
• Joanne – we put together guidelines and best practices as part of our pilot, provided a series of templates as well
• Recruiters need to be careful about what they are posting as well
• Competitive pressures? Joanne – Yes we hear it on a daily basis. We factor it in but it is not the driving force.
• Doug – I agree. Sales force will want it, still in its infancy from a sales standpoint, commercialization will happen quickly
• 48 asset management firms surveyed – 2/3rd said they don’t have budget for social media plans
• Doug – we go through a pilot process, based around business objectives, long process, lot of controls, doing a # of these now in SN
• Q: is internal training content on a wiki subject to recordkeeping rules. Yes absolutely.
• Joanne – tell us about your pilot process. Vendor selection – key was records retention, biggest challenge for compliance
• Joanne – also wanted a vendor that could control access to individual site features. Pilot for 25 agents and 25 recruiters
• Joanne – noticed most agents participated on Facebook, saw a lot of activity on LinkedIn from recruiters
• Joanne – going through final stages of evaluating pilot, looking at how our agents are using the tools, good success stories
• Joanne – recruiters were successful, need to provide agents more tools on how to navigate this space, success on agent side as well
• Doug – on banking side have rolled out a number of social networking tools, associates like it, use it, need more controls
• Doug – been doing this for a couple of years on the banking side, rolling out pilot on the securities side
• Joanne – staffing implications? still an unknown, impact to sales material review unit, impact to email monitoring group
• Joanne – pilot was limited to 50 people, hard to judge scale at this point, have to keep an open mind and be flexible
• Doug – I would echo those remarks. Training helps and is always the key when rolling these things out
• Joanne – who is the vendor? We cannot disclose it at this point.
• Joanne – need to complete technological due diligence, retain and retrieve records, ability to integrate with email systems
• Joanne – our vendor allows us to block certain functionality on the social networks (i.e., block posting videos)
  
• External use tools hosted outside the organization (Twitter, Facebook) present a greater risk, work activity takes place everywhere
• Doug – develop policies to address social media use, provide guidance on usage (developing handbook), inform on regulations
• Doug – use tools to supervise, block activity when prudent and monitor as appropriate, ensure we can retain & supervise
• Doug – provide initial and ongoing training, developed process for social media issues, built in escalation process across org
• Joanne – FINRA should be proud, ahead of the curve. Happy to see guidance, haven’t seen same movement on insurance side
• Joanne – hoping to see them follow FINRA’s guidance.
• Joanne – what about brand risk? Always viewed agents as ambassadors, have to provide guidance and formalize a process
• Doug – compliance is the guardian of reputation risk and protects us in that regard
• FINRA will look for written supervisory procedures addressing how you supervise social media, that you testing, audit, etc
• Joanne – established a social media working group to figure out whether content is interactive or static, have to give guidelines
• Doug – policies are ever changing, must adapt as we learn, the definition of static vs interactive is tricky, training is key
• Q: firms that allow LinkedIn profiles how are recommendations monitored? Joanne – our vendor can block this
  
• Joanne – when a recommendation is given you need to approve, if you can’t block build it into your procedures, audit on backend
• Who can use social media? Joanne – Consider the compliance history of each rep before opening flood gates, training requirements
• Doug – I agree, certain tools will be more applicable for certain individuals and departments
• Training task – always a never ending process, need to keep abreast of innovations in the industry – this is a challenge
• Doug – we have a great training organization, bedrock to moving out any new technology
• Static vs. Interactive content will be a tough area – gray area in middle.
• 3rd party posts: only responsible if you adopt or entangle firm in post
• What about disclaimers? Firms may consider this, part of facts and circumstances of a situation
• What about monitoring? Firms that allow typically have some level of monitoring to protect against inappropriate content
• May be complaints that come in, firms need to keep an eye out for those to ensure compliance
• Entanglement: firm puts up a posting, 3rd party reads, calls you, comments on it and then you get involved in an answer
• Blog post, 3rd party responds, you forward and comment that you agree (you are then adopting it)
• Joanne – NYL does not have a blog, we do have social media monitoring services, directed towards Corp. Comm.
• Joanne – our vendor can block favoriting or liking a post to protect us against inadvertent endorsement should have in-motion monitoring for posts
  
• Doug – you need to have automated controls, should have in-motion monitoring for posts (Socialware provides this)

For more information on this webinar check out Doug Cornelius’ summary post here. And finally if you are interested in getting started with social networking please take a look at how Socialware is helping firms and individuals today.