(This is a guest post from Stephen Selby, Director of Regulatory Services at LIMRA.)

As social media users in financial services have discovered over the past couple of years, it’s tough to build a business in a swamp. It makes me think of the King of Swamp Castle from Monty Python and the Holy Grail.

Listen, lad. I’ve built this kingdom up from nothing. When I started here, all there was was swamp. All the kings said I was daft to build a castle in a swamp, but I built it all the same, just to show ‘em. It sank into the swamp. So, I built a second one. That sank into the swamp. So I built a third one. That burned down, fell over, then sank into the swamp. But the fourth one stayed up. An’ that’s what your gonna get, lad—the strongest castle in these islands.

Social media regulation has been a little like Swamp Castle. FINRA released Regulatory Notice 10-06, and built a foundational concept for all of us to follow—all the old rules apply. But the financial services industry as a whole did not believe that foundation was solid enough. We let the first castle sink into the swamp.

Then FINRA released Regulatory Notice 11-39. The financial services industry again said that foundation was not strong enough, so we again let social media fall into the swamp. Foreign regulators like the FSA in Great Britain and the IIROC in Canada published social media guidance in their own countries. The National Association of Insurance Commissioners issued its own white paper on social media. The messages from the FSA, IIROC, and NAIC all tracked well with FINRA’s core message—all the old rules apply. But the financial services industry was not happy with that foundation yet and, even with all of the positives, watched social media again fall into the swamp.

January 2012: The Fourth Castle of Social Media Regulation

Now we have both the SEC and the Commonwealth of Massachusetts issuing guidance for Registered Investment Advisors. To paraphrase the King of Swamp Castle—I am here to tell you what you’ve gotten—the strongest castle in these islands! We have seen securities regulators, insurance regulators, and now RIA regulators all say the same things: Yes, social media is an exciting new form of communication. Yes, we will apply existing rules to this new technology. It should be clear that we are no longer standing in a swamp, but on the strong foundation of a consistent message.

Let’s see how that consistent message applies to RIAs in the Commonwealth of Massachusetts. I will present these points in a different order than communicated by the Massachusetts Securities Division their memo of January 18, 2012. This order should help you structure your approach to social media for RIAs:

• Social Media is subject to supervision. Have a plan. Document it. Test the plan at least annually.
• Training. No policy or procedure is very good unless people know what it is. Therefore training is a really good idea.
• The firm is responsible for all business content. It’s social media time. Do you know what your investment advisor representatives (IARs) are saying?
• Social media is subject to record-keeping requirements. You will need a method of capturing and retaining social media content in a manner consistent with SEC retention rules. (For more, see 950 CMR 12.205(7)(a) and 17 CFR 275.204-2.)
• Frequent supervision is better. Massachusetts states on page 6 of their document “A review done daily would be considered a reasonable supervision of the adviser’s social media site.” Less frequent review can be acceptable—if you have low traffic volumes.
• Social media is usually advertising under RIA rules. Go back to the basics and apply current advertising content and supervision standards for RIAs to social media. Performance reporting via social media is subject to the same content and time standards as any other kind of media. Cherry picking past performance is not permitted. Recommendations are not permitted.
• Adoption and Entanglement applied across regulators. RIAs are responsible for content which they post, Tweet, re-Tweet, or like, or to which they link. RIAs are also responsible for content which is posted on behalf of their representatives by business partners or anyone else who has an interest in the success of the IAR. Selective removal of some content results in the “adoption” of the remaining content.
• “Liking” can be Problematic. To completely understand what Massachusetts is saying about the “Like” button, I encourage you to read SEC Regulation FD and the recent SEC risk alert. The key take-away is that your firm is responsible for any content which is “Liked” by the firm or an IAR. Make sure it’s good content.
• Read the SEC guidance. Massachusetts makes reference to recent SEC guidance on social media usage.

More Best Practices for Social Media Compliance

The Massachusetts document “The Use of Social Media by Investment Advisers” is not intended to tell the whole story. Here are a few ideas you need to consider beyond the recent guidance provided by the Commonwealth.

• Put clear license and registration disclosures in social media profiles. This will help insulate the firm against the appearance of soliciting where the firm is not registered.
• Update the firm’s Code of Ethics. Not all states require a code of ethics, but communicating a standard and then training your people to that standard is always a good idea.
• Face-to-face supervision is a best practice. Take time to review the computers and mobile devices of IARs when visiting satellite offices.
• Understand what is being said about you by solicitors and other business partners. You may need to review agreements to specifically address the use of social media.
• Get help, but take responsibility. Social media use and supervision is ultimately up to you, but Socialware and LIMRA can help get you going.

In closing, think of the King of Swamp castle. “All the other kings” may say you are daft for using social media when there are so many questions, from ROI to compliance. Prove them wrong. Now that regulators for the securities, insurance, and investment advisory business have spoken, you have a firm compliance foundation on which to build your social media practice.

When so many regulators are saying the same thing—maybe you really do have the opportunity to build the strongest castle in these islands.

Image source.

This article from InvestmentNews explains the change:

Tweet away: Finra backs off social-media posting regs

While the article is right to emphasize how this change provides a better way forward, advisors can’t just “tweet away” without a second thought. The reality is that post-use filing was always about the content. And it’s still about the content, even though what FINRA is proposing will remove hurdles that have stymied some firms in their use of social media.

Proposed FINRA Changes for Social Media Postings

Here’s the crux of the proposed change, quoted from FINRA’s letter to the SEC of December 22, 2011:

FINRA recognizes that a member may face supervisory and operational difficulties if it is required to file an online forum post given that the member will be supervising such communications in the same manner as correspondence. Accordingly, FINRA is amending proposed FINRA Rule 2210(c)(7) to add a filing exclusion for retail communications that are posted on online interactive electronic forums. Nevertheless, members should be aware that this exemption does not apply to any filing requirement that may arise under either federal law or SEC Rules.

“Retail communication” is a key term here. According to FINRA,

Retail communication would include any written (including electronic) communication that is distributed or made available to more than 25 retail investors within any 30 calendar-day period. ‘Retail investor’ would include any person other than an institutional investor, regardless of whether the person has an account with the member.

Even more important—and the reason to be careful about how you “tweet away”— is the last sentence from the first quote: “. . . this exemption does not apply to any filing requirement that may arise under either federal law or SEC Rules.” If the nature of what you’re discussing, via social media or otherwise, requires a filing, it will still require a filing.

The Medium and the Message: Two Compliance Checkpoints

We can think of firms and advisors as having two compliance “checkpoints” for any message they put out:

• Checkpoint 1: the medium. FINRA and other regulatory bodies have always treated different mediums differently. For instance, they don’t expect an advisor to digitally record an in-person conversation the same way they would archive an e-mail. Over the past few years, social media has presented a host of new challenges to regulators, since it often does not fit neatly with existing regulations that address other mediums. The new FINRA approach changes things up—a lot.
• Checkpoint 2: the message. A prospectus is a prospectus and must be treated like one. Some types of content will always require pre-review; some will always require post-review. The new FINRA approach doesn’t change that at all.

FINRA Is Not Handing Out a “Hall Pass”

For more insight on this, we asked for the opinion of Stephen Selby, Director of Regulatory Services at LIMRA. Here’s what he said:

FINRA content standards and filing requirements must not be confused. FINRA advertising filing requirements merely mandate that certain materials have to be reviewed by FINRA at a particular point in time. Regardless of FINRA filing requirements, content standards always apply. When using social media for “business as such,” clear, accurate and suitable information must be provided, conflicts of interest must be disclosed, and both sides of the story must be told about investments and investing strategies.

Keep in mind that advertising rules are not the whole story. FINRA also looks at public communications through a lens of “Standards of Commercial Honor and Principles of Trade,” which covers a whole range of issues. There have been recent proposed amendments to the new advertising regulations, which would potentially relax FINRA filing requirements for certain limited uses of social media. Any potential relaxation of filing requirements should not be confused with a hall pass.

It’s a real benefit for firms and advisors that FINRA is proposing these changes, and I’m sure it will reduce the headaches for the compliance officers we work with every day. They’ll still need to archive 100% of the social media messages that their advisors send out, but the filing burden will be lower.

But Selby hit the nail on the head: relaxed standards for certain types of messages don’t equate to a “hall pass” for all social media conversations. Firms should create strong, sensible policies for social media, train their advisors appropriately, and make sure that they have the right tools in place to ensure that they can still adequately supervise advisors’ social media use. Regardless of how the regulatory standards evolve, we’ll be here to help.

Image source.

There are two lessons to take away from this:

1. The SEC has made social media a priority. After yesterday’s news, it’s clearer than ever that 100% of firms should prepare for social media audits by having strong social media policies and social media archiving in place.
2. There’s no need to be scared of social media. Fraud is still fraud. While the social networks do present many new challenges for advisors and compliance officers, when it comes to shady activities, only the mediums—not the underlying rules—have changed.

The SEC’s Stance on Social Media

A year ago, the SEC fired a shot across the bow when it issued its sweeps letter about social media. (Our CEO, Chad Bockius, analyzed the SEC letter in two blog posts, which you can find here and here.) If that weren’t enough of a call to action for firms and RIAs to take social media compliance seriously, yesterday’s action should be. Social media use is widespread, and the SEC has articulated firms’ responsibility to monitor and archive these communication channels.

The SEC’s main communication this week, “Investment Adviser Use of Social Media,” is sober and methodical. Probably none of it will be news to compliance departments that have been actively working with their firms’ advisors or agents to promote the compliant use of social media to build professional networks and increase business. But the SEC guidance is useful for the step-by-step reminders it gives about creating and enforcing consistent and meaningful social media policies that balance risk prevention with the need to do business at a reasonable pace.

Firms have a responsibility not only to implement such policies, but to carry out active monitoring of advisors. Those that don’t could be fined, even in they have a formal policy of prohibition for social network use, because it is unreasonable to believe that policy alone will protect consumers. In our 2011 year-end webinar, Bockius discussed the need for all firms to prepare for social media audits. This week’s SEC action demonstrates how serious that need is.

Be Vigilant, But Don’t Be Afraid of “LinkedIn Fraud”

The SEC’s pursuit of the Illinois advisor doesn’t mean that firms should fear the use of social media—much less avoid it altogether. Some of this week’s media coverage might mislead social media holdouts into taking this view.

Consider the headline of this (otherwise very good) article from AdvisorOne:

SEC Charges Advisor With LinkedIn Fraud, Issues Social Media Alerts

I was trained as a newspaper journalist, so I know what headline writers are up against: they have to compress the whole story into just a few words. Unfortunately, headlines like this one make it sound like “LinkedIn fraud” is some new category of crime. In fact, the misdeeds being investigated by the SEC represent very old types of financial fraud, but simply carried out over a social network rather than in person, via mail, via e-mail, or over the phone.

The article rightly points this out in its eighth paragraph:

“Fraudsters are quick to adapt to new technologies to exploit them for unlawful purposes,” said Robert B. Kaplan, co-chief of the SEC Enforcement Division’s Asset Management Unit, in a statement. “Social media is no exception, and today’s enforcement action reflects our determination to pursue fraudulent activity on new and evolving platforms.”

Advisors and firms shouldn’t be scared of LinkedIn (or Facebook or Twitter or blogs). Instead, they need to avoid engaging in illegal, unethical, or otherwise prohibited advertising practices . . . just as for every other medium they use.

Regardless of how the story is covered, it’s good to see that the SEC is following through with its commitment to focus on social media. Your firm needs to be ready if the SEC spotlight should fall your way. Is it?

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?

Much has already been written about the fact that “liking” a piece of content can be viewed as an endorsement (for now I won’t go into all of the compliance issues associated with endorsements, entanglement, etc.). As a result most firms with registered reps choose to block this capability on the social networks.

Before going any further let me offer a quick 101 class on sharing content. There are in fact multiple ways to “share” content and information across Facebook, LinkedIn and Twitter. Likes, Shares, Favorites and ReTweets – these are all actions you can take on these popular sites but all basically produce the same result. They publish a “message” to your social network thereby spreading the content further. Since it was an action you took there is a perceived endorsement of that content.

To make things a little more complicated we also have to remember that “liking” on Facebook has multiple uses. It is used to share information and show interest in a particular post but it is also used to connect to Facebook Pages (vs. adding a friend on a personal Facebook page). For the latter you are basically subscribing to that Page, opting in to receive that Page’s updates.

As a test I wanted to see if the terms around content sharing affected a firm’s policy. In fact, today it does. We analyzed policies from across the industry and found the following:

• 36% block Facebook and LinkedIn “Likes”
• However, for those that block Facebook Likes, 0% block LinkedIn Comment Sharing, News Sharing and Update Sharing.
• For those that block Facebook Likes only 20% block Twitter Favoriting and Retweets.

It would appear that the action of “liking” is viewed differently than “sharing.” But should it? I would suggest no. If your policy is to prohibit the programmatic sharing of content (meaning it is shared by clicking a button vs. posting something manually) then that policy should apply to all social networks, for all content.

Let’s dig into the notion of creating a basic post on these social networks. For example, creating a status update on Facebook or tweet on Twitter. Those posts may be original content or they may be a reference to some other piece of content you’ve found interesting. From this perspective you could argue that if you are going to block “liking” (used in the generic sense) then you should also limit the posts being made directly via the social networks themselves. While I hope this is not the case I feel compelled to offer the perspective.

One thing I think we can all agree on is that whether it is social networks or some other medium the test is of the content itself. Sharing a post about the Cardinals winning the first game of the World Series (Go Cards!) clearly does not pose a risk, whereas sharing a message on a specific financial product could…it all depends on the content. As you can see, content is king. The message should be scrutinized vs. the action that delivers it to your social network.

What is your take? We’d love to hear it. Just leave a comment below.

And one more thing, this will be one of the many topics we are discussing at our Compliance User Group on November 4^th. If you need more information please contact your Customer Success Partner.

Earlier in the month FINRA submitted proposed changes to NASD 2210 to simplify the guidelines around communications with the public. These changes not only simplify many issues for the industry, but they also provide insight into how FINRA interprets or plans to interpret the communication guidelines.

Back to Notice 11-39. In general, the content is very clear and does address many of the questions we’ve been hearing from the industry. I won’t walk through the entire Notice, but rather focus in on some of the more interesting aspects.

The first topic is around the review of a rep’s social media presence before launch. It is clear from 10-06, this notice and 2210 that aspects of the site, like profiles, must be approved by a registered principal prior to use. Much has been made of the notion of having to pre-review the first post on a rep’s social media site. While FINRA mentions that some firms require this, it does not say that it is required – an important distinction. If you are a firm taking this approach, remember you can always provide a handful of pre-approved first posts to the field to get started.

FINRA goes on to reinforce this point by saying “unscripted participation in an interactive electronic forum comes within the definition of public appearance.” And remember public appearances DO NOT require prior approval by a registered principal. Not surprisingly, this clarification aligns with the proposed changes to NASD 2210 – making it clear that this content can be supervised in a post-review fashion.

There is a lot of discussion around personal devices and whether the recordkeeping requirements apply. FINRA clarifies that the device is irrelevant, it is the content of the communication that must be considered. Later on in the Notice there is more discussion around personal devices, but here they focus on whether or not personal content must be retained and supervised. FINRA points out that firms can choose to treat all content created on these devices as business communications. However, another approach is to flag content as personal vs business such that firms have flexibility in how they supervise the material. In this scenario firms would have the ability to supervise 100% of the business-related social media communications while only conducting spot audits on the personal information. A huge time saver for the supervisory teams.

On the topic of technology, Question 3 looks at solutions that can automatically delete content after it has been read and sent. This type of technology typically applies for SMS (i.e., text messages). Regardless of if a solution exists to automatically delete content, if it is related to “business as such” it still must be retained and supervised.

One item that gets referenced over and over is training and education. Just as they do in Notice 10-06, FINRA points out “a firm’s policies and procedures must include training and education.” They also share that some firms require reps to “Certify on an annual or more frequent basis” that they are acting in a manner consistent with the firm’s policies. For more suggestions on what you need to include in your training and education program, check out the recorded webinar from our social media lifecycle series focused on training.

What did you think of the notice? Do you still have questions? If so please share them below.

The good news for those considering a move to social is that FINRA clarifies you do not need prior approval for communications posted on social sites as long as they qualify as interactive electronic forums. FINRA tried to introduce the concept of static vs. interactive with Notice 10-06 but unfortunately it created more confusion than clarity in the market. That was the one component introduced in 10-06 that was new, but there were no rules in place to support the actual definitions. The rest of 10-06 was clarification on existing rules. So we are back to where we started. It is all about the content and it’s classification.

You can access the entire SEC submission here, but to save you some time I’ve gone through and called out the parts that are most applicable to social media.

Communication Categories

The current NASD Rule 2210 divides communications into six separate categories:

• Advertisement
• Sales Literature
• Correspondence
• Institutional Sales Material
• Independently Prepared Reprints
• Public Appearance

FINRA is proposing to reduce the categories from six down to three. The new categories would be as follows:

• Institutional communication: includes all communications that fall within the current guidelines.
• Retail communication: includes any written (including electronic) communication that is made available to more than 25 retail investors within any 30-day period.
• Correspondence: includes any written (including electronic) communication that is distributed or made available to 25 or fewer retail investors within any 30-day period.

The proposal eliminates the current definitions for advertisement, sales literature, institutional sales material, public appearance and independently prepared reprints. They point out that “communication that currently qualifies as advertisements and sales literature would generally fall under the definition for retail communications.”

As it relates to Retail communication they provide a supervisory exemption for specific categories of this communication type. Two of these categories matter for social media. The first is any retail communication that is posted on an online interactive electronic forum (eg., social networks).  The second is any retail communication that does not make any financial or investment recommendation or otherwise promote a product or service of the member.

FINRA explicitly points out that the clarification around interactive electronic forums “codifies their current interpretation of the rules governing communications with the public on interactive electronic forums.” In other words, Notice 10-06 provided guidance to the industry but did not actually create any new policy. This change will make the interpretation explicit from a rule standpoint. There is no mention of the notion of static vs. interactive, which has caused confusion in the industry since no policy exists to back up those definitions introduced as part of 10-06. The second exemption broadens a current principal such that it would apply to all retail communication. This second exemption is important for social media because so much of what gets shared isn’t financial or investment related.

Both of these are positives for firms looking to embrace social for their reps.

In a nutshell it makes clear that organizations DO NOT need to pre-review content that is posted to social networks like Facebook, LinkedIn and Twitter.

Of course, recordkeeping requirements sill must meet the current standards. In addition to the recordkeeping, firms must supervise this content in the same manner as correspondence (i.e., post-review).

FINRA also reminds readers that rules around predicting performance, implying past performance will recur or making any exaggerated or unwarranted claim, opinion or forecast still apply. In other words your content must be fair and balanced. Something that a California-based broker failed to adhere by and as a result of her tweets was fined and suspended by FINRA.

One of the other interesting additions was the following: “Given the rapid changes to technology used to communicate with customers, FINRA believes it will be useful going forward to have exemptive authority with regard to the principal pre-use approval requirements applicable to retail communication in certain circumstances.” This statement shows an understanding that technology and communication mediums are evolving faster than policy can keep up. In theory this will help FINRA support the industry in a timely fashion without having to wait for formal rule clarifications or modifications (like this one).

3^rd party comments were mentioned but FINRA felt that Notice 10-06 in combination with previous guidance adequately addressed that topic.

The one area not specifically called out is social networking profiles. Going back to 10-06, FINRA calls for this content to be pre-reviewed and classified it as an advertisement. Under the proposed rule change it would now be classified as a retail communication. There is nothing in the proposed changes that would suggest it qualifies for the exemptions outlined above. As a result this content must still be pre-approved before being posted to social networking sites.

Comments on the proposal must be submitted to the SEC on or before August 24, 2011. At this point it is anyone’s guess as to when this will be finalized and approved. Independent of that date, these changes provide some great insight into how FINRA will look at social media communications. I suspect other state and federal regulators will be taking note as well.

In my opinion there are 10 reasons why firms should start down this path immediately.

1. Competitive advantage
   The industry slowly started moving towards social early last year. Near the end of 2010 the pace accelerated. Today firms feel the competitive pinch, recognizing that major players are not just opening up access but treating social as a competitive weapon in their business. Social is becoming core to an effective, integrated digital strategy. In a world of no call lists, indifference towards email and lack of trust in advertising, firms and advisors must find new ways to connect with customers.
2. Recruiting
   Over the last 12 months we’ve seen firms use the fact that they provide social media access as part of their overall advisor recruiting message. In an InvestmentNews article Amy Webber, President of Cambridge, mentioned that as part of their social media program they’ve “launched a council to help shape the way the broker-dealer accommodates and recruits the next generation of advisers.” Clearly placing an emphasis on how next generation technology (ie., social media) will be critical to the advisor of the future. In 2011 and 2012 this message is going to evolve to focus less on providing access and more on partnering to help drive true social business. Firms that start now will have a head start in the recruiting battle and will be more effective at helping advisors use these tools effectively and efficiently.
3. Consumer demand
   Today 1 out of every 6 minutes is spent social networking by consumers. And the volume of users is massive. There are over 750mm users on Facebook, over 275mm on Twitter and over 125mm on LinkedIn. Social networking for consumers is as core to our online experience as Google is these days. What this means for you is that consumers expectations are increasing. They expect their advisors to be on social. They expect to be able to communicate via this medium. They also expect more transparency – largely due to the last few years. And if you aren’t there, you should expect your competition to be, waiting to help fulfill YOUR customer’s needs.
4. Advisor demand
   In a recent research piece we found that advisors that participate in social earn more money, have larger average account sizes and more clients (look for the full report shortly). Results like this are reasons why Ledermark found that 85% of financial services professionals under 50 are utilizing social media. And this number is only increasing. Most have already seen the news about Morgan Stanley, opening up access to advisors and as April Rudin, CEO of The Rudin Group, points out “When Morgan Stanley Talks, People Listen.”
5. Compliance risk
   Some firms still believe that a policy of prohibition will keep them safe and out of the cross hairs of the regulators. This couldn’t be further from the truth. A Socialware survey from last year showed that over 40% of advisors were knowingly violating corporate policy by use social media for business purposes. If you do have a policy of prohibition you must have procedures in place to test and ensure adherence. A quick search of LinkedIn will illustrate that trying to prevent this tidal wave is a futile exercise. FINRA started doing some cursory audits using this approach last year. For 2011 they made social media an examination priority. In addition, you are starting to see action by the SEC and the state regulators. This action is not only guidance and examination, it is also fines and suspensions. Earlier this year FINRA took action on an advisor who was posting inappropriate content to Twitter. This is just the beginning, especially for firms that choose to hang on to a state of prohibition.
6. Brand awareness
   In an age where trust in brands is decreasing and trust in friends and family is increasing, firms have an opportunity to leverage the power of social networks to grow their brand’s awareness. It won’t necessarily come from corporate pushing the brand message, but rather from the people that make up the brand. Specifically, those individuals that have personal networks that will listen to what they have to say and ideally help spread the word.
7. Top line growth
   As firms progress from prohibition to participation, the next level and ultimate goal is social business. It isn’t enough to simply have a presence. If you are going to take the leap into social, the goal should be to support your corporate objectives and your advisors individual goals. This ranges from lead generation, partner development, account growth, client retention and of course recruiting. Not only can the right social program drive these objectives, but you can also measure your results. As you work to develop your strategy you might find the following videos helpful from industry leaders like Morgan Stanley, Guardian, Forrester and Thomson Reuters.
8. Wealth of information
   A few of the top objections I hear about adopting social is that advisors don’t know what to say or that it takes too much time to create content. Independent of whether you agree with that objection, it is important to recognize that you can realize so much value simply by “listening” to what your network is saying. Did someone just take a new job? Get promoted? Did they recently get married? Perhaps they just found out they will be having a new baby. All of this information is valuable to an advisor and it is all sitting right there for you to consume on social networks.
9. Broaden the conversation
   Building a business as an advisor isn’t always about 529 plans, mutual funds, life insurance, etc. It often starts with building a presence in the community. Perhaps you’ve joined the local Rotary club. It starts with current events. You are at a friend’s party and start discussing the latest topic capturing the country or your town’s attention. Perhaps it’s a hobby. I still remember the first HD broadcast of The Masters. Amazing! The point is there are so many ways to “connect” with people on social networks. What may start as a discussion about triathlons may end in a fruitful, long-standing business relationship.
10. Relationships, Relationships, Relationships
    More than any other reason stated above, advisors and their firms should move on social because of the value it brings to your relationships. No other medium constantly keeps you connected to your friends, colleagues, clients, prospects and partners. It is a way for you to stay plugged in to what matters to your connections and gives them a mechanism to do the same. It will help you manage more relationships than you thought possible and in the process actually more meaningful ones as well. In today’s volatile market the world is going to have questions, your network is going to be seeking information, your clients will want to be assured. If you aren’t on social, you are missing an opportunity to further develop the most important relationships to your business.

I hope these 10 reasons provide valuable food for thought. As a bonus I have one more to share.

10.5 Social is a Journey, not an event
Social media is not a silver bullet and results don’t happen overnight. You will be starting a journey with your social initiative. One that will require in depth knowledge about the issues. One that will require you to evolve your processes. One that will require you to redefine how you do business. The key with this journey is that you take the first step – you have to start somewhere and I would suggest that you have to start today. If not, you risk losing ground to the competition, you risk unrealized opportunity, you risk losing clients, advisors and most of all you will look up one day and force yourself to scramble to catch-up. An approach that will likely cost you more in the long run.

I’m sure this is only a partial list, so feel free to add your own reasons below. We would love to hear your thoughts.

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.

• What does the Sweeps letter mean for the industry?
• What should I do now?
• What resources are available to help me get compliant, quickly?

Before we dive in, if you haven’t read Part 1 please check it out for some background on this discussion.

So what does this mean for the industry? First and foremost it is a wake up call.  Remember social media is no different than any other form of electronic communication. Content that is considered an advertisement is an advertisement, regardless of the medium (website, forum, social network, etc).  In a nutshell everything has changed but nothing has either. The communication mediums have changed drastically but all the same rules apply. The FSA made this clear, IIROC made this clear and so did FINRA.

In a recent Wall Street Journal article they shared that “an SEC official said that misuse of social-networking sites is an issue that is cropping up during SEC examinations and enforcement actions. Problems include advisers who use false information in their LinkedIn profiles or overstate their experience, said John Walsh, associate director and chief counsel of the SEC’s office of compliance inspections and examinations.”

It is clear that social media has caught the attention of the SEC (and every other regulator for that matter).  Following this sweep and increased scrutiny I fully expect to see fines and perhaps a summary of lessons learned from the SEC. I doubt there will be any new rulemaking, at least not in the short term. FINRA, IIROC and the FSA have all found their existing rules to be sufficient, although clarifying guidance has been issued.

What should you do now? Here are five tips you should consider to make sure you and your firm are protected:

1. Take action immediately. Start with an audit of your firm’s policies on social media use. If you don’t have one, put a policy in place immediately.
2. Review the regulator’s guidance on social media, like FINRA 10-06. Use this as a best practice template on how to proceed.
3. Audit your firm’s use of social media. See how it is being used, the value it is driving and how big of a compliance problem you have today.
4. Put in place the necessary tools to automate the compliance process to ensure you and your firm are protected.
5. Train your advisers on the compliance issues and best practices associated with sites like LinkedIn, Facebook and Twitter.

To help get you started I’ve compiled a list of resources that might help:

Whitepapers / Guides

• Companion Guide to FINRA 10-06
• Guide to Twitter Social Networking Compliance
• Guide to LinkedIn Social Networking Compliance
• Guide to Facebook Social Networking Compliance

Webinars

• Social Media Adoption Lifecycle (a series of 6 detailed webinars)

Community

• SocialTurns.com

We will keep following the moves of the regulators in this space. Check back for additional information soon and let us know how your efforts to adopt social are going.