Social Media without the Compliance Headaches

Guest Contributor: Stephen Marsh, CEO & Founder, Smarsh, Inc.

A number of registered firms have prohibited the use of LinkedIn, Facebook, Twitter and other social networks due to the perceived compliance complexities, and this isn’t anything new. According to a survey of financial professionals conducted last year by American Century Investment, 47 percent of respondents named regulatory or compliance issues as their single biggest concern with using social media for business purposes.

I love to ask those firms: have you searched for your company on LinkedIn?

In most cases, the results are predictable. The reality is that employees areusing LinkedIn, Facebook and other new media platforms, and the line between “business” and “personal” is easily blurred. Businesses that choose to turn a blind eye on social media compliance mandates are putting themselves at risk, which could end up being extremely costly. Rather than banning usage outright, firms are better served by understanding and addressing the risks associated with social networking.

Firms that have embraced social media have found it to be an increasingly important business tool for prospecting, securing new clients and strengthening relationships with existing clients and partners. As organizations recognize the value of social media and begin to use it, it’s crucial that compliance officers understand the regulatory demands that come with this new form of communication.

All indications suggest that enforcement of social media regulatory obligations will increase in 2011:

* FINRA issued Regulatory Notice 10-06 in January 2010, outlining the specific record keeping and supervision requirements for social media communication, including Twitter, Facebook and LinkedIn.
* FINRA also noted social media among its examination priorities for 2011.
* The SEC recently sent sweep letters to a number of registered investment advisers, investigating and reviewing how firms are using these tools for business purposes.
* Private fund advisers (such as hedge funds and private equity firms) who will soon register with the SEC as a result of Dodd-Frank will also be subject to this oversight.

There are a few key considerations for closing the social media compliance gap. First off, understand how your representatives are using social networking, or how your firm can best leverage the tools. With this knowledge, firms can confidently and effectively extend their electronic recordkeeping and supervision policies and procedures governing other forms of electronic messaging to social networking.

While having a policy in place is crucial, many companies struggle when it comes to actually enforcing it. That’s where technology can play an important role – automating policy company-wide, defining which features employees can access, and capturing and preserving all social networking messages for review and production.

Social media isn’t going anywhere. With the right policies, enforcement procedures and technology automation in place, the financial services industry doesn’t need to hesitate in regards to social media adoption.

In an effort to shed light on organizations’ attitudes toward compliance in today’s demanding regulatory environment, Smarsh is conducting a survey on electronic communications oversight and retention. Compliance professionals are encouraged to take the survey at

About Maureen Lowe

President and Founder of Financial Technologies Forum, LLC. Editor-In-Chief of FTF News. Entrepreneur, Jersey Girl that recently returned to Jersey, Loves to Bake, Married to a Kiwi, First Time Mom
This entry was posted in Compliance, Financial Technology, Guest Blog, Regulation, Social Media and tagged , , , , . Bookmark the permalink.

One Response to Social Media without the Compliance Headaches

  1. Pingback: Seeing Social Media as a Business Tool, Not Just a Trend | The Bull Run

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