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Paul Kiser

Last year I managed to offend some investment and financial professionals when I said that their industry would have to engage in Social Media, including blogs, if they were going to stay competitive. They told me that their firms and industry regulations prohibited them from using Social Media tools in their business practices. They also said that some firms that prohibited personal involvement in Social Media. The reaction during and after the meeting was one of a strong denial of the usefulness of Social Media in their industry mixed with a ‘kill-the-messenger’ attitude. It was a typical response by business people who have been blindsided by Social Media.

…Professionals that rely on personal contact and personal relationships are finding that effective use of Social Media is key to maintaining and growing their business.

It is hard to start a dialogue with business professionals on how to use Internet tools such as blogging, Facebook and Twitter when the attitude is that Social Media are an encompassing evil that must be avoided, or at the very least, ignored. The problem, and opportunity, is that business professionals who can use Social Media to engage with others will have an advantage over those who are mystified, or more typically, scared by the power of Social Media. Professionals that rely on personal contact and personal relationships are finding that effective use of Social Media is key to maintaining and growing their business.

The fact is that since that meeting many investment related firms have changed their positions by at least 90° and some have done a 180° shift in their attitude about Social Media in business. That is not surprising considering that their future is at stake; however, investment firms do have strict guidelines on advertising and investment advisement, so using Social Media is not the ‘anything goes’ environment for which most of us are accustomed.

Both the Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA)[1] are charged with protecting investors by establishing rules to govern investment-related activities. Among those rules are requirements for firms on educating, monitoring, supervising, and document the activities of brokers representing their company. In January 2010, FINRA issued Regulatory Notice 10-06 titled Social Media Web Sites – Guidance on Blogs and Social Networking Web Sites. This notice did not prohibit firms from engaging in Social Media activity, but rather offered common-sense guidelines for investment firms on how Social Media tools could be used to meet FINRA and SEC requirements.

(End of Part I)

(Note: Part II will be posted by 5 PM PDT, Monday, May 23rd)

[1] FINRA is the largest independent regulator for all securities firms doing business in the United States. FINRA’s mission is to protect America’s investors by making sure the securities industry operates fairly and honestly. All told, FINRA oversees nearly 4,550 brokerage firms, about 163,500 branch offices and approximately 631,110 registered securities representatives. (From About FINRA at www.finra.org.)

(This article is advisory in nature and the author does not represent the Financial Industry Regulatory Authority (FINRA,) the Security and Exchange Commission (SEC), nor any federal or state regulatory authority. The opinion expressed should not be considered as a legal or official position regarding the use of Social Media tools in industry practices.  The author has sought out publicly available relevant documents and information as the basis for the opinions expressed; however, final authority on the issues discussed in this article rests with the appropriate government, regulatory, and/or company division that oversees the area of concern.)