Posts Tagged ‘FINRA’

Social Networking: Going Online Without Crossing the Line (Research Magazine Cover Story)

Tuesday, February 16th, 2010

RES-March310-Cover-200pxIn the March edition of Research Magazine they take a detailed look at the challenges financial advisors face in dealing with social networking sites like Facebook, Twitter and LinkedIn. As they point out “Some have blocked access to networking websites from advisor workstations. At least one broker-dealer requires new hires to delete their LinkedIn profile as a condition of employment.”

The challenges are very real in these highly regulated environments. Kip Gregory sums it up well “Who could blame any firm operating in a regulated industry for taking a cautious approach in the face of all that? Especially in financial services, which is at its core an industry built around the management of risk. The question is: How do you, as a competitor in this business, choose to respond to a clearly shifting landscape?”

Of course the latest move by FINRA helps ease some of the concerns of these financial firms. With the release of Notice 10-06 they address some of the big questions firms are asking. In addition to this Notice you can also download the Companion Guide to FINRA Social Networking Compliance. And if you are still hungry for more information be sure to check out the play-by-play summary of the February 3rd FINRA webinar on this topic.

The article then moves on to discuss the “techno-solutions” to solving the social networking compliance problem. They highlight our Risk Manager solution for it’s ability to turn on or off any part of a social network that could cause a compliance issue. In addition, there is discussion around our ability to moderate content before it hits the social sphere as well as providing full capabilities to do a post-review after the fact.

I don’t want to give the entire article away so let me just leave you with a few final thoughts:
- Social networks are here to stay and the firms that find ways of adopting them first will have a big advantage. In fact the article points out that “100 percent of the 48 firms surveyed thought social media was here to stay and 84 percent thought it would have a lasting impact on financial services.”
- You do have to create a social media policy (don’t skip this step) – here is a good place to start (first paragraph)
- Look for ways to institutionalize your policy through social networking compliance solutions.
- Plan for change – the sites change, compliance issues change and the way advisors use these tools will change.

Read the full Research Magazine article here

Tags: , , , , , , , , , , , , , , , ,
Posted in Compliance, News, eDiscovery | No Comments »

Real world advice for independent advisors, an interview with Kristen Luke

Monday, February 8th, 2010

wmmlogoKristen Luke, from Wealth Management Marketing, was gracious enough to spend some time talking through her work with independent investment advisors and financial planners. We specifically discussed social networking, what’s holding her clients back and how they are dealing with SEC and FINRA compliance issues.

1. Tell me a little about your background and Wealth Management Marketing
“Prior to starting Wealth Management Marketing in October of 2008, I headed up the marketing department of a boutique wealth management firm in San Diego for 3 years.   It was a natural transition from working at my previous job to starting WMM since I performed similar tasks, but now I do it for a variety of firms instead of just one.   I have a BA in Business Economics from the University of California, Santa Barbara and an MBA with an emphasis in Marketing from San Diego State University.  WMM develops marketing plans for independent advisors and also provides the back office support required to implement the strategies. Basically, we are an in-house marketing department outsourced.”

2. Can you profile the clients you typically work with?
“I primarily work with independent investment advisors and financial planners.  The majority of my clients are RIAs which can range from solo practitioners with $10 million in AUM to firms with 20 employees with a few hundred million in AUM.  I also work with individual advisors at larger brokerage firms who need help creating their own individual marketing plans or are looking for assistance in creating a social media marketing strategy.”

3. What are their top issues/challenges when it comes to social media marketing?
“I consistently hear the same two challenges from my clients:
- Meeting compliance requirements.  Up until recently, it was not clear what an advisor could and could not do according to FINRA.  It is still unclear about what the SEC requires.  So many advisors tell me that their compliance departments won’t allow them to participate in social media.  I’m not sure if this is going to change now that FINRA has released their guidelines.”
Quick Note: The Companion Guide to FINRA Social Networking helps address these questions.
- “Finding the time to participate in social media.”

4. What percentage of your clients are engaged with social networks today?
“Almost 100% of my clients are engaged with social networks in some way.  Most of them are only involved with LinkedIn.  Closer to 50% are involved in Facebook or Twitter for business purposes.”

5. For those that are active how are they dealing with compliance issues?
“Some advisors have not been concerned about it and are doing nothing.  Others are passing everything through their compliance departments prior to posting on LinkedIn, Facebook and Twitter.  Others are using sites likes Socialware to archive their social media activity.”

6. What would recommend to your clients that are getting ready to start engaging with social networking?
“I would recommend that they first understand what they can and cannot do from a compliance standpoint.  Then I’d recommend they start playing around with the different sites to get an understanding of which ones they like.  I find that the advisors that are most successful with social media are the ones who personally enjoy interacting on the different sites.  Once an advisor has a basic understanding of social media, it’s important to create a plan of action.  This includes finding their target market and centers of influence on the different sites, determining what type of information to broadcast and how often to do so.  Social media is like any other type of marketing.  It should be planned out to increase the likelihood of success.”

It is clear from our day-to-day conversations and interviews like this that social media will continue to play a big role for independent investment advisors and financial planners. As Kristen points out it is critical to understand the compliance issues before jumping into this new channel of communication. I’ve already mentioned the Companion Guide to FINRA Social Networking and in addition you should look at the summary of the recent FINRA webinar explaining Notice 10-06 on Social Networking Compliance.

For more information from Kristen you can follow her on Twitter or at her blog.

Tags: , , , , , , , , , , , , ,
Posted in Compliance, Marketing, eDiscovery | No Comments »

FINRA Webinar: Compliance Considerations for Social Networking Sites

Wednesday, February 3rd, 2010

FINRA_logo

If you happened to miss it, FINRA hosted the Social Networking Compliance webinar this afternoon.  Here is a summary from their site on what was scheduled to be discussed:

“This webinar covers compliance and regulatory considerations when using social networking sites to communicate firm business. With the advent of Facebook, LinkedIn, MySpace and Twitter, business use of social networking sites has become popular and can present supervision challenges for firms. Panelists from FINRA discuss the guidance that was recently issued in Regulatory Notice 10-06.”

If you already read Regulatory Notice 10-06 you didn’t miss too much. I will say the most valuable part was the Q&A from the audience and FINRA staff. As you might expect the FINRA team focused on the overarching guidelines but didn’t spend too much time interpreting specific situations. They made it very clear that this is the responsibility of the firm to evaluate a sites capabilities and determine what the firm’s policy will be on usage, supervision, record keeping, etc.

If you are looking for more details on how these guidelines get interpreted for use on social networks you should download the Companion Guide to FINRA Social Networking Compliance.

And if you are interested in a summary of the webinar here are all of my live tweets that I posted during the session. Feel free to follow me on Twitter and send me any questions you have.

  • Joe Price talking about FINRA task force on social networking, 14 industry participants, came out with Notice 10-06
  • 5 key points, record keeping, suitability, types of content, supervision & 3rd party posts
  • Record Keeping: rules flow from SEC standards, no way to change this. Must retain, archive and retrieve to be compliant
  • Record Keeping: technology is going to be the issue, FINRA spoke to firms (including Socialware – we solve this today with Risk Manager)
  • Record Keeping: discussing integration to enterprise archives, lot of interest in area, each firm needs to assess each solution
  • FINRA will not endorse any technology provider, firms need to assess the fit, determine if it delivers on compliance needs
  • interested in position on acceptable formats of social media messaging for FINRA filing and internal record keeping
  • Question: how do you file a tweet? Acceptable filing format is PDF for FINRA but not for retention (discovery issues, etc)
  • Suitability: 01-23 applies to social media directly, applies around recommendations, “call to action” or “suggestion”
  • Suitability: more specific to individual more likely it will be a recommendation, general news not a rec.
  • Suitability: call to action is key, not going to have prior approval requirement so be careful of what you post
  • Possible use of templates? Firms have libraries, drop a recommendation of an approved template, be careful of specific products
  • Question: “Business as such?” SEC term, not addressing it in Notice 10-06, books and records rule apply in this situation
  • Question: “if we decide to utilize social media we must have technology to track information” there are low tech options…
  • …technology is going to be key to make this scale
  • Question: “if a rep indicates where they work is that an advertisement?” ex: business card info on LinkedIn, likely already approved
  • Question: “business related inquiry on social media site?” addressing later, need to have procedures for reps to follow
  • Content Types: “interactive electronic forum” have def. of public appearance (i.e., chat rooms), must all be supervised
  • Content Types: public appearances do not need to be pre-approved
  • Content Types: blogs? static communication = advertisement = prior approval. However some allow for interaction
  • Content Type: These interactive blogs would be considered a public appearance (i.e., allowing comments)
  • Question: “What if firm hosts a blog and allows for 3rd party comments? What if it is a marketing brochure blog?” This is static
  • Content Types: key ideas, employees should have site use approved for use of logos, content, etc (the static elements)
  • Content Types: engaging on the sites can then be supervised post-use, these are the interactive pieces
  • Content Type: firms should decide on their own policies as part of this.
  • Content Types: key is whether or not a dialogue is supported or intended on these portions of social sites
  • Technology to capture content is still evolving, will there be compliance grace period? FINRA answer “No”
  • Firms must make the call if a vendor can meet the FINRA requirements (check out companion guide http://bit.ly/72HiGj)
  • Recently looking at a blog that wasn’t interactive, send email back and comment *not real-time interactive communication*
  • Question: “On Twitter, is initial posting interactive or static?” background content is static part, tweets are interactive
  • Question: “what if social site doesn’t allow for archiving?” answer don’t use it or use a 3rd party solution (i.e., Socialware)
  • Question: “what about broker-to-broker communication?” defined as institutional sales material (2211), already defined
  • Question: “How will FINRA test compliance?” FINRA provides policy guidelines, new process, examiners take steps to analyze steps  …
  • Question: …will look for supervisory steps, will look for policies, will look for other steps that compliance is being addressed with
  • Supervision: interactive communications can be supervised, implement risk based principles to review communications
  • Question: “Use of sites for recruiting?” Yes – they are subject to FINRA advertising rules, static vs. interactive
  • Question: Recruiting issue – expectation of earnings. Be careful here, this is most frequent issue
  • Question: “can registered reps conduct pre-approved, scripted, filed FINRA presentations via a webex type of application, w/instant messaging” …
  • …”assuming IM’s are being supervised by a reg. principle?” webinar=static, questions=interactive (can be supervised)
  • Supervision: can choose to pre-approve or not, can choose to sample pre or post, lot of flexibility, you decide
  • Supervision: communication between research and investment bank always need review, as well as incoming complaints
  • Question: “do personal social sites of RR need to be monitored to ensure not being used for professional use?” …
  • Question: … firms need to establish procedures/policies on this, once used for business firms are responsible,
  • Question: “don’t want reps using Facebook, agree not to, is firm responsible to still track?” I don’t know, maybe based on person
  • Question: “are firms accountable for how RR identifies themselves on personal SN site” firms need to adopt clear policies on this
  • Question: “does review of interactive communication have to be conducted by a registered principal” can be some delegation
  • Should not allow RR to use social media sites if you cannot supervise it (for business purposes)
  • Ensure you train those that are granted access, enforce your procedures, have consequences for violations
  • Question: “prohibit from using certain social site features, are firms accountable if RR use them if “prohibited”?” …
  • Question: Answer is same. They are responsible. (Socialware can disable these features completely to protect the firm – look at Feature Level Access Control of Risk Manager)
  • Question: “how do you supervise an anonymous complaint?” guidance already provided, must be able to identify person & issue
  • 3rd Party Posts: not subject to advertising rule (great clarity), situations where you can be held accountable
  • 3rd Party Posts: adoption & entanglement, you republish or direct people to content, you just adopted it and endorsed it
  • 3rd Party Posts: influenced posts, can you please post a testimonial to my Facebook page = entanglement
  • Question: “implicit endorsement of posts, rep didn’t remove a comment?” does not create an endorsement situation
  • Question: “RR retweets a post, is this an endorsement/entanglement” absolutely endorsement or adoption
  • Question: “What if you “like” a comment on Facebook” Yes absolutely that is an endorsement (FYI – Socialware can block this)
  • Question: “what if statement is just wrong, what should firm do?” adopt policy to enable quick action, still needs to be supervised
  • Adoption & entanglement is SEC concept, one-off answers not the way to go, each firm should develop a complete policy
  • Firms are doing a lot of different things to monitor 3rd party posts, complaints, publishing guidance
  • Great FINRA webinar, hope you enjoyed the live tweets, be sure to grab the Companion Guide for SN Compliance http://bit.ly/72HiGj

Look for much more from Socialware on this topic. And if you haven’t registered for a Risk Manager invitation please do so here (it is free). Of course, if you want to get started right away you can sign up for the premium version here.

Tags: , , , , , , , , , , , , , , , , , , ,
Posted in Uncategorized | 2 Comments »

Just released: Companion Guide to FINRA Social Networking Compliance

Tuesday, January 26th, 2010

FINRABlogPostYesterday FINRA surprised everyone by releasing Regulatory Notice 10-06, titled “Social Media Web Sites – Guidance on Blogs and Social Networking Web Sites.” Since September of 2009, FINRA created and has been working with a Social Networking Task Force to discuss “how firms and registered representatives could use social sites for legitimate business purposes in a manner that ensures investor protection.” One of the key goals of this task force, and this new notice, is to interpret the FINRA rules with the knowledge of the changing landscape of social media to allow firms to communicate in this channel while still protecting investors.

For the most part there is nothing new in the Notice. FINRA reinforces their position on long standing electronic communication guidelines reiterating that those rules apply exactly as stated for social networking sites such as Facebook, Twitter and LinkedIn.  For example:

  • Recordkeeping – firms ARE required to retain social media records that a related to a broker-dealer’s business.
  • Supervision – firms MUST monitor the extent to which employees are complying with policies.
  • Pre-approval – firms MUST define their policy for pre or post approval depending on their risk profile.

While reinforcing some of the core guidelines there were a few key clarifications that make adopting social networks a little bit easier in the financial services arena.  For example:

  • Static vs. Dynamic content – a registered principle is still required to pre-approve any static content such as a profile or Twitter background details. Dynamic content such as wall posts constitute an interactive electronic forum and therefore firms do not have to have a registered principal approve these communications prior to use.
  • Third-party posts – FINRA clarified that posts by customers or other third parties are not governed by rule 2210. However, if a firm endorses one of these posts they may become attributable to the firm.

While this update is a very positive step for firms there is still the open question of how to address the compliance requirements in an automated fashion.  Additionally, FINRA does not address every fine grain issue you will run into on social networks that could trigger a compliance violation. For example, does Favoriting a tweet trigger rule 2210 because of an endorsement? And more importantly how will protect your firm from these possible violations?

To help firms accelerate their adoption of social networking tools Socialware has released the Companion Guide to FINRA/SEC Social Networking Compliance. This guide provides a detailed analysis of social networks and how their capabilities can trigger regulatory rules. Furthermore, it provides a clear checklist of requirements to evaluate social networking compliance solutions.

For more details you can read the press release and download the guide now.

Tags: , , , , , , , , , , , ,
Posted in Best Practices, Compliance, News, Social Middleware, eDiscovery | 5 Comments »

When is a social media policy not enough?

Wednesday, January 20th, 2010

policyAs more and more companies race to adopt social technologies they inevitably ask the question, “what should our policy be?” Depending on the industry and the company you will find a wide range of policies. Some are a few paragraphs and some are literally pages long. If you are looking for some examples here is a great list of policies across a number of industries.  Additionally, here is a more specific list of government related social media policies.

I will be the first to say that policies are important when it comes to opening up the social web to your employees. But a word of caution, don’t stop after pressing the save button.  In a recent report from Deloitte they posed the question to employees “what is your company’s policy when it comes to use of social networking channels”? Here were the responses:

  • 26% – There are specific guidelines as to what you can and cannot say online in relations to the company and/or client matter
  • 7% – The policy is to use your discretion when it comes to posting comments and opinions on the world wide web and social networking sites
  • 11% – There is a policy, but I don’t know what it is
  • 23% – There is no policy
  • 24% – Don’t know if there is a policy

Note that 58% either don’t have a policy or don’t know what it is. This should be concerning. After all if your company believes it’s important enough to create a policy isn’t it just as critical to ensure the policy is followed? On that topic how will you monitor it to ensure compliance? In regulated industries like financial services and government this is even more critical as regulators require that certain activity be captured and archived.

The Independent Insurance Agents & Brokers of America (IIABA) recently published a great resource titled “Creating a Social Web Policy for Your Independent Agency”.  The report offers some very good recommendations and detailed steps on how to go about creating a social media policy. However, there are two recommendations that I would like to expand on.

The first is related to “compliance with federal and state discovery, document retention and other laws and agency procedures.” In the guide they state “employees should copy and paste any client specific social media communication into the agency management system and record an activity in the same manner they would in using other media.”  While that is one way to capture and retain the data it is enormously unproductive and it also raises questions around completeness of the archive.

What happens if someone forgets to take these steps or decides they simply don’t want to? A better approach would be to leverage automated solutions, like our Risk Manager product as an example, that sits between the end user and the social networks to automatically capture and retain the content. Not only will this eliminate the manual work around data capture and retention but it also guarantees completeness.

The second is around advertising statutes and regulations. They correctly state that “social media posts are communications subject to various federal and state laws/regulations, including characterization as advertising under some state laws, so employees should make sure they are complying with all such laws in using social media.” This is correct. The detail that is missing though is how you will comply in this new environment. Again I’ll go back to our Risk Manager product as a mechanism to help ensure compliance on this point and many others.

I encourage you to download the IIABA report if you have not created your social media policy. If you are looking for more information on how the FINRA/SEC rules impact social network use you should take a look at this summary as well. Last be sure you have the tools in place to make it as easy as possible for your employees to meet the policy and compliance guidelines as they start to use these powerful sites.

Tags: , , , , , , , , , , , , ,
Posted in Compliance, News, Social Middleware, eDiscovery | No Comments »

Bringing financial advisors into the modern world

Tuesday, December 15th, 2009

investment-news-logoInvestmentNews, a publication specializing in delivering news and analysis essential to the business of financial advisers, posted an in depth look at Socialware and our solutions this past Friday.

Most of us take for granted the use of social networks at work.  However, for registered investment advisors or broker-dealers, they must juggle using these tools to grow their business while ensuring compliance with federal and state law.  For example, look at the laundry list of rules around advertisements and the type of communications that must comply with regulatory rules:

- Banner advertisements, blogs, and bulletin boards are advertisements
- An email or instant message sent to more than 25 prospective retail customers is considered sales literature
- A registered representative’s email sent from home or a firm office falls under FINRA jurisdiction
- Chat room discussions are considered public appearances
- Password protected websites are considered sales literature

Then of course, rules 17a3 and 17a4 of the Securities Exchange Act require broker-dealers to preserve certain electronic records. And in many cases prior approval and supervision is generally required before being published.

Naturally this raises a lot of questions around the use of social networks.  Is participation in Facebook, LinkedIn or Twitter considered an advertisement? Does it need to gain prior approval before publishing? Does this information need to be archived by the same standards?  On this point Richard Ketchum, the CEO of FINRA, came out on national TV calling for a complete audit trail of this data.

So while the picture isn’t entirely clear one thing is for sure. These sites offer real business value for the financial advisor community today.  Individuals or firms that are engaging on the social networks are doing their best to stay compliant even if it requires a lot of manual work.

Just look at some stats captured during a recent RidgeWorth Investments’ Webinar
- 60% of financial advisors who participated believe that social networking will grow in importance over the next year or two.
- 1 out of 5 said it already plays or will play a significant role in their 2010 marketing efforts

And let’s face it, social networks are all about connections, friends and acquaintances.  And in the offline world those three things all translate to gold for financial advisors…referrals.  The problem is the old way is inefficient and outdated. Advisors and firms need to get in the game so to speak, and soon.

But there is light at the end of the tunnel. First FINRA is holding a live webinar titled Compliance Considerations for Social Networking Sites on March 17, 2010 at 1:30 p.m. EST.   Here is the webinar summary in their words:

“This webinar covers compliance and regulatory considerations when using social networking sites to communicate firm business. With the advent of Facebook, LinkedIn, MySpace and Twitter, business use of social networking sites has become popular and can present supervision challenges for firms. Panelists from FINRA discuss applicable FINRA rules for communications with the public and offer practical guidance on how to monitor and supervise social networking sites.”

The other piece of good news is that there are finally tools available to help both individual advisors and larger firms be compliant while using these tools (even if the final FINRA guidance hasn’t been delivered).  This is covered in detail in the InvestmentNews article.

The article covers how Socialware’s technology helps advisors and firms get compliant by enabling complete social media archiving, real-time content moderation and discovery of every piece of captured content.  But what’s more, they also discuss how our Social Middleware solutions can help take social networking investments to the next level by aggregating professional posts, from all three social networks, into a single search engine optimized feed that will help drive additional free traffic to your site, improve your market awareness and ultimately help drive sales.

I hope you enjoy the article – if you do please pass it along using one of the sites below.  And as always we would love to hear your comments.

Tags: , , , , , , , , , , , , ,
Posted in Best Practices, Compliance, Marketing, News, Social Applications, Social Middleware, Social Networking News, eDiscovery | No Comments »

IMSA Social Media Webinar Recap

Tuesday, December 8th, 2009

IMSA Logo_2 2-20-04

The massive level of interest continues to build around social media and its use in the regulated financial services space.  On December the 2nd I had the opportunity to be one of the speakers on a Webinar hosted by the Insurance Marketplace Standards Association (IMSA) entitled, Social Media Communications…It’s Here to Stay.  The session offered an interesting glimpse into the current state of the regulated financial services industry. Topics included:

-Practical business approaches for financial advisors
-Real world stories from an industry leading firm in terms of wanting to adopt the technologies but struggling with how
-The specific FINRA/SEC regulations governing use
-The technology available to deal with these regulations today

To emphasize the power and longevity of these tools, the session kicked off with the Socialnomics video which we have profiled before. This set a solid framework for Kip Gregory from The Gregory Group to cover the practical side of a financial advisor using these tools (specifically LinkedIn in this case) to build their business.  This type of practical use case is critical in this industry.  One thing that we continue to hear industry-wide is that there is a lack of clarity around how independent registered representatives in the field might use these tools to build their business.

Insurance companies continue to feel pressure from the field to open up access and this makes perfect sense for these advisores with small businesses and limited resources to be interested in going where the market is.  Kip talked about using your LinkedIn connections and LinkedIn companies and groups to make connections through your network with high value prospects and then to reach out to them through this common channel…powerful, practical stuff.

This part of the session stood out in contrast to the next speaker who was representing a firm and talked about their strong desire to embrace these tools but the current corporate directive is to prohibit access.  Most of the firms that we speak to in the industry fall into this category, i.e. a strong desire to understand and embrace the tools but struggle to effectively deal with the regulatory or corporate policies.

While John Travagline from IMSA did a great job of presenting the rules and regulations around both supervision and monitoring, i.e. FINRA Rule 3010, FINRA Regulatory Alert 07-59 and the Books and Records requirements including SEC Rule 17a-3, SEC Rule 17a-4 and FINRA Rule 3110, it was clear that most firms were going to wait until the FINRA task force releases its findings and possible policy adjustments in March.

FINRA has made clear that while there is some willingness to be flexible on the Supervision and Monitoring regulations, that the Books and Records regulations will not be revised as they are SEC requirements.  We are all waiting on the edge of our seats to see what changes with the task force findings.

We had the opportunity to follow these speakers with a presentation of an industry first, social middleware, which allows companies to open up access to these social sites without losing control or introducing regulatory risks.  Our objective in the session was to expand the thinking beyond simply controlling and managing towards thinking about true enablement capabilities.

It is always fantastic to participate in sessions like this with a mixture of representatives from compliance and the business.  Ultimately both sides of the house need to work together to empower the business. It is always fun to show what we refer to as the “Art of the Possible” with these technologies.  I truly believe that this industry is at a tipping point and other regulated industries will soon follow suit.  For example, the FDA recently held hearings on the use of social media in the pharmaceutical industry but no specific guidelines are expected for a year.

There may be a watershed event, like the publishing of the FINRA task force findings or more likely, the brave and progressive firms, many of whom we are working with that are trailblazing in this area, will begin to share powerful case studies of the sales, servicing, communication, recruiting and collaboration benefits that they are realizing from embracing social technologies.

One thing is for sure: the attitudes toward these technologies and the assumptions about their long-term impact have changed dramatically.  Where once it was assumed that these technologies would be prohibited, very few firms continue to hold that position and the IMSA conference was a great representation of how far we have come in a short amount of time.

Tags: , , , , , , ,
Posted in Best Practices, Compliance, Marketing, Social Middleware | No Comments »

Social media policies, regulations and now insurance

Wednesday, November 11th, 2009

It seems there is a new article a day on the increase of social media usage and the need to create corporate policies, train employees on the proper usage and ensure that the brand is not being harmed in the process. Unfortunately, companies are realizing policies are not enough. A report by Deloitte found that “49% of employees say a company policy won’t change how they behave online”.

To compound the problem, new regulations are being issued from FINRA, the FDA, the FTC and many others. Even without these new regulations most companies agree that traditional regulations around communications apply in the new world of social media. For example, SEC’s Rule 17a-4 requires broker-dealers to preserve communications relating to their business and NASD Rule 3110 requires that all electronic communications pertaining to a firm’s business be retained, in a format that cannot be overwritten, for three years.

FINRA CEO, Rick Ketchum, points out that these social networking tools will “challenge your ability to ensure compliance with regulatory requirements”. Translation, regulated companies must start tracking social media participation just like they are tracking and retaining other forms of business communication. This was made very clear in an interview on CNBC where he calls for companies to open up and use social media tools but also points out that there must be an “audit trail” to ensure compliance.

And now today The Hartford announced the availability of social media liability insurance. Here is how they describe the offering: “The Hartford now offers broader coverage for data privacy breaches and social media liability exposures, such as online defamation, advertising, libel and slander”. What’s interesting about this move is The Hartford recognized the problem isn’t going away, or getting any smaller and traditional approaches to dealing with monitoring, protection and enforcement, like web filtering or content monitoring, simply fall short.

So what is a company to do that is concerned about their exposure yet understand that they have to open up access to these tools because the business impact is too great to ignore? We recommend following these steps:

  1. Create your policy: define the social media policy that is appropriate for your business and industry (here is a great list of corporate policies from a variety of industries to help get you started).
  2. Educate the company: train your employees on the proper use of these tools and how to stay compliant with company and industry policies.
  3. Implement and enforce: deploy technology that allows you to control access at the feature level, monitor and moderate content as necessary, retain and archive data and make it easy to produce any social post on demand.
  4. Monitor and learn: watch how groups take advantage of these tools across the organization, highlight best practices and retrain on policies if needed.
  5. Iterate and expand: modify policies if appropriate, encourage broader adoption by employees and expand on the business processes that take advantage of these tools.

And optionally you may want to look at insurance offerings from companies like The Hartford. Liability in the social space has always been a concern and it will be interesting to see how this sector of the industry evolves. In fact, it may be that companies that follow the recommendations above might even qualify for a reduced rate. Time will tell.

Tags: , , , , , ,
Posted in Best Practices, Compliance, News, eDiscovery | No Comments »

FINRA calls for social networking audit trail

Wednesday, October 28th, 2009

On Tuesday, October 27th, Richard Ketchum the CEO of FINRA was interviewed on the “Closing Bell”. By way of background FINRA is the largest independent regulator for all securities firms in the US.

The interview, shown above, focused on the use of social networking tools, like Facebook, LinkedIn and Twitter, by the financial community such as brokers, financial advisors, insurance agents, etc.

While FINRA is still officially working on a definition around social media use and tracking, Richard Ketchum made two very clear points.

First he points out that these social tools are valuable communication channels and blocking access is not the answer.

“Many of them prohibit their reps from using it now, but you know the reality is that’s how everybody communicates. What you’ve got to do is get the information, not prohibit it. It will never work.”

Second, he goes on to say that companies must have a good audit trail of this activity and content.

“We got to have a good audit trail – that the firms have to have it for a compliance standpoint,”

We’ve seen this trend coming in the industry for a while and the good news is that many of the companies we work with are taking the necessary steps today. Look for more information soon on how Socialware is helping companies deal with theses compliance, data security and discovery concerns.

Tags: , , ,
Posted in Compliance, Marketing, News, eDiscovery | 1 Comment »