This notice is very clear in that it focuses on the “nature of various communications and not the methods.” In other words, these rules cover all communication with the public, but in light of the number of inquiries received by their Dealer Members they have specifically called out social media as a new and significant medium of communication.

At the highest level, IIROC states that “all methods used to communicate including, but not limited to, Facebook, Twitter, YouTube, blogs and chat rooms, are subject to the IIROC Dealer Member Rules.” Much like FINRA, IIROC requires their Dealer Members to have clear policies and procedures that guide individuals around the classification of content and associated regulatory responsibility. You should of course download and read the entire Notice, but I’ve called out a few of the more interesting points as it relates to social media.

Recordkeeping Responsibilities

“Firms must retain records of their business activities, financial affairs, client transactions and communication. Whether a communication is related to the business of the Dealer Member, and therefore captured by this requirement, depends on the content of the communication. The type of the device used to transmit the communication or whether it is a firm-issued or personal device is irrelevant…For instance, the content posted on social media websites, such as Twitter, Facebook, blogs, chat rooms and all material transmitted through emails, are subject to the above-noted legislative and regulatory requirements.”

In summary, firms that open access to social media sites for business use must ensure that all communication is being archived. Just like FINRA Notice 11-39, IIROC reinforces that the device used (personal or firm-issued) is irrelevant. It is the content and the communication that matters and is subject to these rules. They go on to say that if firms do not have a way to ensure the compliant retention of data on these sites, they must block an individual’s use.

Suitability and Recommendations

“Dealer Members must be mindful of the additional regulatory obligations that may be triggered as a result of the content of a communication delivered to clients. For instance, a “recommendation,” whether delivered via a social media website or by way of written correspondence, must take into consideration the suitability requirements set out in IIROC Dealer Member Rule 1300.1… At the very least, Dealer Members should implement measures to monitor and/or prohibit electronic communications that constitute a recommendation which must comply with IIROC’s suitability rules.”

This is a common concern for compliance officers in the U.S. as well. As such, most firms that have opened access to social media sites are choosing to deploy real-time monitoring of posts so they can be scanned and captured if they look suspicious. While not the only method to ensure compliance, it’s an additional tool for compliance officers to protect the public, the firm, and their advisors.

Supervisory Responsibilities

“Pursuant to IIROC Dealer Member Rule 29.7(2), Dealer Members must establish policies and procedures that allow them to comply with their supervisory obligations and protect clients from misleading or false statements. Subject to Rule 29.7(3), it is at the discretion of Dealer Members to determine whether to employ: pre-use approval, post-use review or post-use sampling.”

As it relates to social media sites specifically, “Static content, such as a profile, background or wall information, usually considered an ‘original template advertisement’, must be pre-approved pursuant to IIROC Dealer Member Rule 29.7(3) and is generally accessible to anyone. An interactive electronic forum, such as Facebook or Twitter, on the other hand, includes real time discussions and although it does require prior approval, must be supervised to ensure compliance.”

Similar to the approaches being followed in the U.S., social networking profiles across LinkedIn, Facebook, and Twitter must be pre-approved. In addition, they clearly call out that real-time discussions can be post-reviewed. The caveat is that it is still about the content and not the medium. The points above are general guidelines. If someone posts a clear advertisement on Facebook it MUST be pre-approved. This is one of those areas where training will be critical to help determine the nature of the content and the appropriate action to take.

Third-Party Communications and Research

“Third-party posts may be attributed to or considered an endorsement by the Dealer Member, thereby triggering regulatory and legislative requirements. For example, re-tweeting a client’s post or providing a “thumbs-up” may be considered an endorsement. Whether or not a third-party communication will be considered to be the Dealer Member’s communication will depend on the facts and circumstances of each case.”

This guidance is much more restrictive then what we see from FINRA. With that said, many firms prohibit the actions described above, including ‘Liking,’ ‘Sharing,’ ‘Re-Tweeting,’ and ‘Favoriting’ a post. To help ensure compliance firms are deploying automated solutions to prohibit access to these features while on the native social networking sites.

I applaud IIROC for responding to its Dealer Members to ensure clarity as it relates to communication with the public and social media specifically. With hundreds of firms moving forward with social in the U.S., I’m expecting to see the same pattern of adoption in Canada in 2012. 

While firms aren’t delaying their move to social in anticipation of these rule changes, it appears we will have to wait to get the official SEC stamp of approval.

On November 1^st the SEC issued a press release calling for public comment on FINRA’s recent amendment and the proposed rule in its entirety. Written comments are due back on Dec 7^th, 2011. It’s unclear how long the process will take following those comments but this delay is going to push the effort well into 2012.

The SEC calls out six specific areas as it relates to comments. Of the six items outlined, number three is the one area that would really impact social media use.

1. The scope of the definition of “institutional investor” for purposes of [Rule 2210]
2. The “reason to believe” standard under Proposed Rule 2210(a)(4)(F)
3. The requirements applicable to internal communications, public appearances and postings in online interactive forums
4. The requirements applicable to communications prepared by research department personnel
5. The scope of the category of associated persons who financial interests would have to be disclosed in a retail communication that includes a recommendation of securities
6. The scope of the proposed exclusion from the content standards as set forth in proposed paragraph 2210(d)(8)

In the initial round of comments Fidelity and SIFMA “opposed the elimination of the term ‘public appearance’ as a communication category, particularly with respect to interactive electronic communications.” They argued that these posts are “more analogous to physical public appearances. They also argued that recordkeeping requirements would be less burdensome if posts on social media websites are considered public appearances.”

FINRA disagreed. They stated they had “already created an exception from the principal pre-use approval requirements for such posts, permitting members to supervise and review such posts in the same manner permitted for correspondence.”

We will continue to watch this process closely and let you know what comments and changes get introduced that would impact the use of social media in the industry.

What do you think about the proposed changes?

Here are some of the key findings on advisers use of social media:

• 44% of investment advisers use some form of social media and this number is trending up for next year.
• 41% of advisers age 42-51 and 31% of advisers 52-61 use at least one form of social media. This group represents the largest use across the survey population.
• LinkedIn is the most popular social network used at 41%, Facebook is second at 14% and Twitter is third at 8%

When it comes to social media compliance, firms and their advisers are clearly putting themselves at risk for fines, suspension and possible lawsuits. Take a look at these key findings from the survey:

• 69% of firms using social media stated that they have no written record retention policies for social media content.
• 57% of firms using social media stated that they do not retain all content posted on social media websites.
• 68% of firms using social media stated that they don’t have written policies and procedures governing the use of social media by employees.
• 52% of firms using social media stated that the firm does not monitor or review social media content produced by its employees for business-related purposes.

In the words of the Securities Division, “the Survey suggest that investment advisers using social media sites for business communication may not have implemented sufficient recordkeeping systems and/or supervisory and compliance procedures.” This is clearly an understatement of the situation they discovered. Firms should consider this an early warning to the increased level of scrutiny coming down at the state level.

These results come on the heals of FINRA’s latest announcement that they are going to offer additional guidance on social media use by Registered Reps. This Notice, an extension to what was provided in Notice 10-06, is aimed at clarifying key questions arising from the industry.

As we’ve said before, the social media train has left the station. Advisers are going to use these platforms to grow their business (regardless of corporate policy) and the clock is ticking for firms to embrace this movement and ensure compliance. FINRA has already started their examinations on social media and you can expect states like Massachusetts to follow suit very quickly.

The entire Socialware team is pleased to welcome Morgan Stanley Smith Barney to our expanding list of customers that includes the leading financial services firms who are embracing social media in build valuable customer relationships.  Social networks, including LinkedIn, Facebook and Twitter, provide an unprecedented way to attract, win, engage, and retain customers.

Jen Hoyt goes on to report “A major issue in the brokerage industry has been how to utilize social-networking sites while staying compliant with industry regulations that say all electronic messages must be retained for several years. Morgan Stanley Smith Barney said it will implement a technology from the company Socialware that will capture and retain all communications on approved social-networking sites to comply with regulations. Until now, Morgan Stanley Smith Barney advisers who wanted to use LinkedIn for business only were allowed to have static profile pages on the site, and weren’t permitted to post updates or to connect to new contacts.”

Static profile pages are just one example of the challenges for firms with employees who want to take advantage of the numerous benefits of social networks but have been concerned about staying compliant.  Socialware Compass has helped more than 100 financial services firm overcome these types of challenges.  Socialware Voices gives firms even more ability to address the opportunities of social networks in the same way that Morgan Stanley is embracing.  Socialware Insights, a social business intelligence service, ensures firms have the best in class approaches to implementing these programs.

We welcome Morgan Stanley to Socialware, and we look forward to working together to build valuable and measurable customer relationships through social business.

The Social Business Era Is At Hand

starting the process of moving our family from Boston to Austin.

My Road to Socialware

My career path has been a rather unique one. I first started in the financial services industry back in 1994 answering phones for mutual funds at BFDS and over the next few years worked my way out of the client services side of things and into corporate finance. At the age of 26 I was part of a finance team that reported directly to the CFO of State Street Corporation and I had my finger on the pulse of how an S&P 500 financial firm worked. After finishing business school I moved to Fidelity Investments where I worked in channel management right as the web was moving to becoming of significant importance to both retail and institutional business.

I discovered a few important lessons during these early years of my career:

• Customers want to to contact their financial services providers via the channels that are most comfortable for them. Some like the phone, some like snail mail, some like online interactions and so on. It is our job to be available where the customer wants us.
• The world changes quick. When I started in 1994 no one at the company had a web browser at their desktop. Most employees did not yet have email. And while there were a few beepers around, no one was carrying a cell phone let alone a smart phone.  But within three years we all had web browsers and email. Before the end of 1999 we were all trading online and Palm Pilots and Blackberry’s were cropping up. Consumers, particularly high value consumers, adopt new technologies at a rapid pace and it is our job to be ready.
• Costs come down as utility improves. In the early days of any new technology things tend to be very expensive. But as adoption spreads, unit costs come down and the learning curve to use the technology flattens we see huge utility and productivity gains. The inflection point for a technology to move beyond, high priced, time sucking time waster to indispensable business tool will happen. If your customers are using the technology too the inflection point comes much sooner than you might expect.

I took these lessons and my crazy entrepreneurial drive and decided to set out on my own. In 2006 I started an independent Registered Investment Advisory (RIA) firm and set out applying all of this goodness to my own business. One advantage I knew I had in getting started was my early adoption to social media. I was was user number 176,299 on LinkedIn, (there are now over 100 million users) and I saw a tremendous opportunity to connect with people with an efficiency that was never before even remotely possible.

Before long I was getting into podcasting and I was exploring other social media avenues. A trip to PodCamp Boston in the fall of 2007 was when things went to the next level. It was there where people like Chris Brogan, Chris Penn, Mitch Joel and a few hundred people packed into a big room opened my eyes to the full power of digital media for business. This is where I also first learned of a little startup called Twitter.

Discovering Twitter and the resultant explosion of my social network from using it was a bit of a life changer. I met new friends and business contacts whom I never would have met without Twitter. I learned about events and new ideas from people all around the world faster than I could have ever imagined possible before. This new type of social media was going to change everything. That’s when I dove in to social head first.

Since then I have created a social tool called Tweetworks, spoken at numerous conferences on the subject of social in business, and have been fortunate enough to become friends with some of the thought leaders in social business. You might say I had found my calling.

Socialware: The Perfect Fit

It’s just a theory but, I suspect there are few finance guys who have deep backgrounds in social business. And I would wager it is just as unlikely to find social media pros with 17 years of experience in the financial services industry. When Lani told me about Socialware I knew I had to be involved in the company.

Socialware is solving a huge problem for a very important industry that provides very important services to all of us. We all use financial services. And most of us, soon to be nearly all, use social media on a day to day basis. We are coming to expect our service providers to be social too just as we expect them to have a website and phone centers to handle our calls. At Socialware we make it possible for financial services companies to do just that and stay within their regulatory standards.

Social media will never be this new again. Being here now is a very special opportunity to make a big impact on two industries that I care deeply about. This is going to be a very exciting time. There was no way I was going to miss it.

One quick note before you go:

Please feel free to share your thoughts about the opportunities and challenges you are seeing at the intersection of financial services and social media here in the comments section on the Socialware blog. I would also love it if you followed Socialware on Twitter and Facebook. And of course you can follow me on Twitter, find me on LinkedIn and Facebook as well.

The move of LinkedIn to Wall St. marks a shift in the social networking market. In reality this seismic shift has been building for many years.

Social networks started out like so many other technologies – purely focused on consumers. The pioneers of sites like LinkedIn, Facebook, Twitter and many others resembled the Wild West. There were almost no boundaries. People from all over the world drove the movement. The promise of riches and a better way of life created near hysteria.  And finally the businesses followed – either as a mechanism to reach all of these consumer eyeballs or as a way to create new ventures around this social ecosystem.

This move parallels what we saw more than 150 years ago with our push towards the west. As more and more people populated the West new laws, new structures and new businesses naturally were created for the movement to continue and thrive. The settlers at the time could never have envisioned these changes, but they happened and they all seemed to come very quickly.

This is not unlike what we see with social sites and their movement into the world of business. Just like the lawless West saw the creation of a new brand of local enforcement, businesses face security and protection issues of their own. Fortunately, it isn’t a matter of life or death, but it is a matter of protecting massive investments made to brands and the customers they serve.

When there wasn’t a local enforcement agency in those days, the federal government stepped in to chart the unexplored regions of the West, to establish boundaries, and to plan possible routes for a transcontinental railroad. In a similar fashion, federal organizations like FINRA, the SEC, the FTC and the FDIC are stepping up to provide guidance and boundaries for organizations to operate in a social world in a civil and legal manner.

And while back in those days you would hold your information (and your gold) close to your vest, these days consumers and businesses are faced with massive tradeoffs between what details they share and what remains private. This battle is still playing out, both on the social networks and in the courts.

The movement westward also drove changes in how the world communicates. At one point mail delivered via boats and horses was enough. Of course with great expansion comes the need for faster communication.  Back then the telegraph and Morse Code made the instantaneous transmission of information possible. Similarly, social networks have forever transformed how we communicate to one another. In our age, email has become too slow. A tweet or network update has replaced so much of that archaic, “electronic mail”. And just as the telegraph transformed so many industries, social networks are having the same effect today. We see news breaking first on Twitter, like the assassination of Bin Laden. We see the advertising industry being flipped on its head as firms move to highly targeted social advertising. And instead of telling consumers what to think about products, they tell us.

The dust has yet to settle on the impact the wild west of social will have on businesses across the globe. One thing is certain though, the social movement will continue and consumers and businesses alike will settle into this new world and thrive in ways we couldn’t imagine 5 years ago.

One thing is clear. This IPO event for LinkedIn marks a big move for this industry as a whole and of course for them. Some are worried LinkedIn is overvalued. I would argue we don’t fully understand the value LinkedIn will drive for consumers and businesses. We may get enamored with the frothy valuations of still-private companies like Facebook. But let’s face it, they haven’t hit the market yet, LinkedIn has, and my money is on the world’s largest professional network getting bigger, better and stronger in the years to come. Who knows, maybe they will get a town named after them or at least a baby (it has to be better than “like”).

Welcome to Wall Street LinkedIn. The wild west of social just got a little tamer.

Over the past few years, we’ve been helping firms move from a state of prohibition to participation as it relates to Social Networking. Along the way we’ve all learned a lot. We’ve learned how firms should overcome potential pitfalls of enabling compliant access. We’ve learned how quickly the social platforms and their use can change and how this impacts adoption. We’ve also learned that it takes more than just access to social sites to realize the full potential these platforms have to offer.

Instead of just bolting on new features to our compliance solution or taking a generic approach to creating a mechanism to engage on these social sites, we took a step back. We interviewed countless customers, partners, end users and industry experts. We focused on the desired outcomes financial industry executives were looking for (measurable BUSINESS impact). And we looked for opportunities to tie everything into a cohesive social business strategy, not a social experiment. With that knowledge, we built a solution from the ground up, specifically for this industry, and integrated it with the core compliance capabilities of Compass.  This ensured that we were not only driving measurable results, but also doing it in a compliant fashion.

The result is Socialware Voices. The industries first social engagement software that empowers financial services sales channels to attract, win, and serve a broader community of loyal customers. Of course, this is how I think about the product. Here is what Steve Holstein, CMO of Guardian has to say:

“Voices is the only social business product we’ve seen that can provide our workforce with a compliant, powerful, and easy to use internet presence combined with rich reporting tools and analytics.  Voices shows the individual and the enterprise how business leads are actually being developed through social networking.”

The accountability bar for social media has been raised across the financial services. Executives that can deliver results, and prove it, have an opportunity to re-define and re-energize their organizations. Those that simply spend and don’t measure could eventually see the fate that their projects will see – they will be cut.

If you are interested in learning more about Socialware Voices, I encourage you to check out our website and of course, feel free to contact us for a more in depth discussion.  We look forward to discussing your firm’s goals and the challenges you’re facing. In return, we’ll share the specific ways that social business can re-define how the field manages relationships with current and prospective customers.

Our customers often explain the growing dynamic of social business best.  Here’s one such example:

“We quickly realized the marketing and business development potential that social networks represent for our organization,” said Mark Cohen, AVP Digital Media at Cambridge Investment Research Inc. “Socialware has provided us with the ability to offer the advantages of social networks like Facebook, LinkedIn and Twitter to our advisors while ensuring we remain compliant with regulatory policies.”

All of us at Socialware also truly appreciate our strong industry partners including LIMRA. Here’s how Jim Kerley, President of LIMRA Services, referenced working with our team:

“Socialware provides the most advanced solution in the market today to address the specific challenges that financial services companies face as they seek to reap the business advantages social networks can provide.”

Working with great partners and customers, we’ve continued to enjoy the increasing momentum as the leading firms in the industry build valuable relationships through social business.

In order to best serve those that are interested in learning about Socialware and also those that already know us best, we are excited to announce the new version of socialware.com which just went live a little over a week ago.  You will notice new navigation and organization of our content.

We also recognize that you may need different information on our website based on different outcomes you are trying to achieve depending on your role in your organization, whether compliance, sales, marketing, etc. Finally, we will continue to bring the latest news to you about the best technologies and industry updates to better inform your decisions about social business management.

We always welcome your feedback and look forward to having you join us in conversation by following us here on the blog, @socialware, and also socialturns.

American Century Investments surveyed 303 advisors, brokers, and RIAs online at the end of 2010, then compared results to a similar survey a year earlier. This year’s study found that 86% of the respondents have a business or personal social media profile, up 13 percentage points from 73% in Q1 2010.

The lessening concerns about compliance concerns seem to lead the way in the dramatic increase in social media adoption, and more and more firms are successfully deploying solutions to deal with these issues throughout the business. What’s even more interesting? While firms’ concerns decrease, regulatory scrutiny is going up — FINRA put social media on the examination priority list for 2011, the SEC sent out a Sweeps letter and IIROC recently released their social media guidelines. All these trends indicate that social media is obviously a hot topic and beneficial to business – and that IR departments not yet using social media risk being left behind.

Promotions not main goals for social…

Almost 60% of the advisors currently using social media for business mainly monitor industry or market news, research clients or prospects, or reading expert commentary. Next on the list of priorities is sharing news with clients.

…but benefits continue to emerge.

Advisors are generally bullish on social media, with approximately 45% of respondents feeling generally positive about the overall value of social media as a potential tool to grow their business. And while few study participants said they believe social media has “high business value,” those who ranked it highly increased this year over last: 13% in 2011 versus just 8% in 2010.

Also, more financial professionals feel that social media is an “emerging trend with significant future potential” — 56% of respondents agreed with this assessment this year, versus 44% last year.

This survey, which we also covered last year, continues to indicate the importance and growth of social media among financial professionals. Firms that remain on the fence about social media are definitely being left behind.

With this release they have turned LinkedIn into a true daily destination. It is a critical step to becoming more Facebook like – at least in terms of how much time users spend on the site (the average Facebook users spends over 7 hours a month on the site!). For LinkedIn this will translate to more users, more engagement and of course more opportunities to monetize the traffic.

The notion of news curation is nothing new. In fact, we are all curators of news – we do it in our daily lives. Have you ever asked someone “did you see that story about the latest…? You have to check it out!” This notion of personal news curation adds value to the people we interact with, starts new conversations and exposes our interests in unique ways.

With LinkedIn Today they’ve taken a conversation that would happen when we see friends, colleagues, clients and partners and exposes it across your entire network and the networks of those in the industries you care about. In the process you learn not just about news, but also what matters to your network and the individuals it represents.

We’ve established this is a great source of relevant news but it is also a valuable fact-finding, engagement, networking  and awareness generation tool. Let’s look at each one:

1. Fact Finding: As news bubbles to the top of LinkedIn Today you not only see the content but also the individuals that shared it. This is valuable source of information for any sales rep or client manager trying to build a more meaningful relationship or looking for an opportunity to engage.
2. Engagement: Sharing out a news item implies a level of interest. Someone took time to post a message to his or her entire network that this piece of information was interesting. In return you have the opportunity to engage directly with that individual either by commenting back, or indirectly, by sharing that article out as well showing that you have shared interests.
3. Networking: Part of exploring a news story is seeing who shared it. This group will be made up of individuals you are connected with directly as well as those that you might wish to connect to. For those professionals looking to expand their network this exposure of content + connections is yet another way you can start to expand your own personal network.
4. Awareness Generation: Now that LinkedIn has over 100mm users it is more important than ever to establish and grow your presence on LinkedIn. If you’re producing valuable content for your industry and network be sure to include a LinkedIn Share button so the rest of LinkedIn can discover you and your great content.

Although the notion of content curation is nothing new, LinkedIn has found a way to make it all the more valuable for professionals. We rely on people we trust to help make critical decisions and seeing the sources they view as important will only help to deepen those relationships and discover new ones.