“This session addresses supervision of social media, including third-party networks, firm sponsored communities and blogs. Industry panelists discuss FINRA Regulatory Notice 10-06, what their firms do and do not allow, how they monitor activity and the types of applications they use.”

One of the panelists was Debbi Corej, a VP of Compliance at Prudential. Debbi has been a trailblazer in this space helping her firm to understand the risks and opportunities with social networks. She’s shared her insight most recently at the FINRA conference and has graciously agreed to participate in our upcoming webinar, FINRA Conference Recap on Social Media, Tuesday June 8^th at 1 PM CST.

If you haven’t registered yet please do so today. If you have a conflict we will record the session so you can view it at a later date or share it with colleagues.

Some of the topics we will cover on the webinar will be:

• Why you should enable social networking at your firm
• How social networking has surpassed email
• Clarifications from FINRA Notice 10-06
• What’s unique about social networking compliance
• Separating personal from professional on social networks
• The risks of using LinkedIn as a “business card”
• How you get started
• How you set your policy
• How you can manage the risk
• The Do’s and Don’ts, practical best practices

Most importantly we are devoting a large portion of the webcast for audience Q&A. Please register early and share any questions you have. We hope to see you Tuesday.

• “We aren’t allowed to use social networks but we can use LinkedIn”
• “Our firm allows us to use LinkedIn but the activity isn’t monitored”
• “LinkedIn doesn’t fall under Notice 10-06”
• “We prohibit use, and our employees follow that policy”

For those of you following the social media trends in this sector you will recognize right away the risk caused by the beliefs above. Before going any further let me make a few things clear. LinkedIn is a social network. More importantly, LinkedIn is absolutely governed by Notice 10-06. And last, firms that allow the use of LinkedIn without the appropriate policies and oversight are guaranteed to get fined by FINRA at some point soon.

Just look at a recent study by Ledermark. They found “more than 40% of professionals under 50 said a social media presence has led to doing business. They prefer LinkedIn for business and Facebook for personal use; however, both social networks allow them to be more visible, have a platform for questions and answers, and reconnect with old friends, introductions and referrals — all cited as how social media helped bring in business.”

If you think your reps aren’t using LinkedIn do a quick search to find out.  Just enter your company name and see how many profiles show up.

Now onto the assessment. To complete the assessment simply answer yes or no to each question below. Give yourself one point if you answer NO and zero points if you answer YES. Your level of compliance risk will be described below. Let’s get started:

1. Do you prohibit registered reps from using LinkedIn?
2. Is this practice defined in a social media policy?
3. Have you completed spot audits to ensure they are following the policy?
4. Are you pre-approving their profile content before it is posted?
5. Are you completing spot audits to ensure the content hasn’t changed?
6. Are you preventing reps from displaying recommendations on their profiles?
7. Are you archiving the content posted to and created on LinkedIn?
8. Are you supervising the content posted to LinkedIn after the fact?
9. Are you preventing reps from rating answers provided by other members of LinkedIn?
10. Are you preventing reps from emailing more than 25 connections via LinkedIn Mail?

Now tally up your score and match that to the table below.

Score = 0: Good news, you aren’t at risk but you likely aren’t getting any of the benefit of LinkedIn either because you are in total lockdown.
Score = 1-5: You are probably handling compliance in a highly manual fashion. Not only is this costly but it is also error prone.
Score = 6-10: You are at high risk for a fine from FINRA. Quickly find an automated way to manage site access, content archiving, supervision and discovery.

If you are concerned and need some more information here are a few resources that can help:

• Companion Guide to FINRA/SEC Social Networking Compliance
• Social Networking Compliance Webinar
• Summary blog post from the FINRA webinar discussing Notice 10-06

Join us June 2^nd at 11am EST as we participate in an interactive roundtable panel with other industry experts from Fidelity, American Century Investments and DBJ Associates.  We will be discussing how advisors are using social media to communicate with clients and peers and you will able to tune in online from the convenience of your desk.  The free webcast will be streaming live online and you can watch the presentation and submit questions using the embedded player below, or through the BrightTALK website.  If you can’t attend live you can also tune in to the recorded version anytime afterward on-demand.  Comment below if you have any questions or topics you would like addressed. I hope you can join us.

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

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

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

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

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

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

State DOT Social Media Usage:
- 91% use Twitter
- 45% have an active Facebook page
- 64% have a YouTube channel
- 33% offer podcasts
- 45% participate as a member of LinkedIn

The study points out that state DOTs find social media a more efficient way to reach the public with time sensitive traffic and travel information. Survey respondents found Twitter, RSS Feeds, Podcasts and Facebook to be the most effective in reaching their audience.

The Texas Department of Transportation has been one of the DOTs paving the way with social media.  Scanning their Twitter feed (@TxDOT) you can see everything from general news to time sensitive data such as road closures. For example, here is a post they made after the terrible incident with the plane crash in North Austin:

Posted on Twitter:
A small plane crashed into the Echelon Building on Mopac and US 183 around 10 am today. Emergency crews are on the scene. Expect delays. 10:56 AM Feb 18th

One area the report did not focus on was the ability for customers to connect and communicate with their DOT. Most of us would not think to send an email or call our state DOT but commenting on a Facebook status update, retweeting a post or asking a question over this media is very powerful. Here is a great example from TxDOT’s Facebook page.

The other area not touched on is the requirement to comply with public information laws. There is a lot of discussion as to whether or not social media falls under the guidelines of public information. Most compliance officials say it does, as long as the information created is used to conduct of state business. In fact, Wisconsin Attorney General J. B. Van Hollen recently issued an opinion in which he states that electronic communications made by elected officials are public records, even when they are posted on social networking sites. Van Hollen states that the Wisconsin Public Records laws applies whenever the content is connected to the official’s purpose or function.

If you are a government or state agency engaging in social media I would encourage you to investigate this issue more closely. At a minimum start taking advantage of tools available to automate the capture and archival of your social media content.

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 3^rd 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

Kristen Luke

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.

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.