Advisers still shaky on social media policy
By Jason Wallace and Suzanne Barlyn
(Reuters) - As the securities industry finally warms up to using social media sites such as Facebook and LinkedIn, regulators are discovering that brokerages and investment advisers are off to a rocky start.
Some firms are making major missteps as they ramp up their presence on the sites, and many do not even have social networking policies. Or if they do, many have inadequate guidelines.
And while many brokerages and investment advisers were once reluctant to use social media for their work, a growing number find they cannot ignore the marketing opportunity. They are increasingly using social media sites to increase their presence among customers and to recruit new business from investors.
A recent survey by the Massachusetts Securities Division found that 44 percent of the state's investment advisers use at least one social media site. More are expected to use social media within the next year.
Social networking sites, however, have caused a great deal of angst for compliance departments at firms. Many compliance professionals have worried that using social media would expose their firms to scrutiny from regulators for, among other things, not saving copies of the messages sent through the sites.
But findings from industry regulators suggest that some firms are not taking that scrutiny as seriously as they once did, and brokerages that still prohibit social media use can be sloppy about making their policies known.
For example, the Financial Industry Regulatory Authority, the retail brokerage industry's self-funded regulator, asked questions about social media in more than 1,000 brokerage examinations since mid-2010. Not having a social media policy in place - even one prohibiting the use of social media - was the most common violation of industry regulations, according to Amy Sochard, director of advertising regulation at FINRA.
But simply adopting a policy does not guarantee a smooth examination, a periodic regulatory review for brokerages. Failing to enforce existing social media policies, whether through record keeping or the storage of electronic communications, was the second most common violation, Sochard said at a recent FINRA conference. Continued...