Tag Archives: investment firms

Social Media ‘Evolution’ At Nation’s Investment Firms

26 Thursday May 2011

Posted by in Branding, Business, Communication, Customer Relations, Ethics, Government Regulation, Information Technology, Internet, Management Practices, Public Relations, Social Interactive Media (SIM), Social Media Relations

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Paul Kiser

Can your investment advisor write a blog about his or her job? Can they Tweet that they just read a great article on oil futures and add a hyperlink? Can they post that they had a big day in the market? Prior to January 2010, the answer was no…not unless they wanted to risk her or his job.

Securities Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules didn’t specifically prohibit business-related Social Media participation, but SEC regulations on advertising and communications have been presumed to extend to online engagement and in a vacuum of good guidance, most major firms took the position of forbidding their representatives from participating in Social Media formats. This removed the fundamental aspect of Social Media that benefits commerce on the Internet, the one-on-one connection.

In January 2010, FINRA issued Regulatory Notice 10-06, which gave investment firms parameters for allowing their representatives to use Social Media within the bounds of SEC and FINRA regulations. The reaction was not instantaneous because firms had to solve the issue of how to supervise agent’s online communication. Protocols had to be established, software had to be adapted and installed, and training of agents had to be implemented; however, there has been a rapid Social Media ‘evolution’ in investment advising during the past 12 months.

For some firms, a deliberate, but ‘conservative approach’ to implementing Social Media engagement is being employed. One industry representative said, “…we had to help agents know what they can talk about and what they can’t talk about.” But she added, “…I’d rather be doing this now than wait three years and try to figure it out…Social Media exists and it’s not going away.”

For New York Life the direction was made very clear according to Ken Hittel, Vice President, Corporate Internet, who said, ” Our CEO, (Ted Mathas) made it very clear that agent participation (in Social Media) is a requirement.” New York Life uses a software program to meet SEC and FINRA regulations of supervising agent’s Internet interactions. Hittel said that the implementation of the program, “…went smoothly and was completed in a couple of months.”

The SEC regulations on advertising and adviser/investor communications are not new and apply to all methods of interactions, including those performed via the Internet. A FINRA podcast outlines five issues that apply to all forms of investment communications. All statements made by an agent must:

  • not be exaggerated or misleading and all material facts must be disclosed
  • clearly identified the firm and agent
  • not include or imply any forward-looking statements
  • provide the customer/investor a sound basis to evaluate the services or market
  • file any statements regarding mutual funds, variable products, and/or exchange traded funds within 10 days of being published

Each investment firm is expected to train their agents on how to comply with SEC and FINRA requirements. Hittel said that the New York Life agent training program is “..not just compliance.” He pointed out that Social Media creates 12,000 “Brand Ambassadors” for the company and they based their Social Media training on a “best practices” approach. Hittel said that there is a saying at New York Life, “…that you can do anything, not everything,” which is reflected in New York Life’s approach to Social Media engagement. The firm has established a progressive program for Social Media participation by their agents…within the scope of SEC and FINRA regulations.

FINRA Clearing a Path for Investment Firms to Engage in Social Media

25 Wednesday May 2011

Posted by in Business, Customer Relations, Ethics, Government Regulation, Management Practices, Public Relations, Social Interactive Media (SIM), Social Media Relations

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A version of this article first published as
Investment Firms Allowed to Use Social Media Under SEC/FINRA Rules
 on Technorati.com

Paul Kiser

Eighteen months ago a game launching bird heads at pig heads didn’t exist.

Eighteen months ago Tony Hayward was a star as CEO of BP.

Eighteen months ago most people thought Charlie Sheen was an actor.

Eighteen months ago most investment firms thought that financial advisors were prohibited from using Social Media in business.

Now Angry Birds is near world domination, now Tony Hayward is a footnote in public relations infamy, now we know Charlie Sheen is Charlie Harper…the possessed version of him, and now Social Media is not taboo in the investment business.

…in the world of investing, the Social Media ‘evolution’ has had to meet the compliance issues of the regulatory agencies meant to protect the investor from unethical advisors…

The world is evolving faster than most people can absorb, so it’s not surprising that some industries are adapting to new technologies faster than others, but in the world of investing, the Social Media ‘evolution’ has had to meet the compliance issues of the regulatory agencies meant to protect the investor from unethical advisors.

Social Media tools like blogs and Internet-based social networking tools have opened up a new environment for business by allowing a rapid-response connection between the customer and the seller of a product or service. In most Internet commerce it is a caveat emptor (let the buyer beware) situation, where the buyer must pursue legal remedies for a broken contract or unethical representation of a product or service after the fact. In investment advising the company or firm is expected to protect the buyer before, during, and after the fact, which requires the firm to intercede and supervise interactions that involve investment advice. That has led many firms to prohibit all Social Media involvement by its representatives.

However, seventeen months ago the largest independent financial regulator stepped forward with a road map for investment firms on how Social Media could be used by their representatives while meeting the need to protect the investor.

…the regulations only effect business communications that involve investment advising and promotion. Personal blogs, Twitter, Facebook, and other Social Media tools are not a concern for the regulators…

Joseph Price, Senior Vice President of Advertising Regulation/Corporate Financing at FINRA (Financial Industry Financial Authority) discussed the issues with investment firms and Social Media with me earlier today. Price is one of the authors of Regulatory Notice 10-06 titled Social Media Web Sites – Guidance on Blogs and Social Networking Web Sites that was published in January 2010. Price said that using Social Media, “..depends on the firm’s business model,” and that it, “..has to make sense for the firm.” He confirmed that the regulations only effect business communications that involve investment advising and promotion. Personal blogs, Twitter, Facebook, and other Social Media tools are not a concern for the regulators even though individual firms may have policies prohibiting personal on-line interactions.

Price said that a common question he hears from firms is from those who prohibit all Social Media involvement by their representatives. Their concern is whether a firm is meeting the regulatory requirements when they have no Social Media supervisory functions in place because they have prohibited the activity.

Another question that FINRA has had to deal with involves deleting inappropriate user comments in chat rooms and on blogs. Price asked, “..by selective deletion, has the firm adopted the posts they haven’t deleted?” His suggestion to firms is that they have a policy in place that outlines the approval/deletion of comments. As long as a firm follows the policy and doesn’t prejudice the comments to favor the firm and its products, the company will likely not be considered to have approved and adopted the user comment.

Regarding investment business blogs, Price explained that they “require prior approval” by a firm before they are published because they fall into the category of a static communication that includes any form of advertising.

The Regulatory Notice 10-06 answers ten questions for firms about guidelines for using Social Media in the industry of investment advising.  FINRA has followed up that document with webinars, podcasts, and seminars to assist their member firms in the ongoing process of adapting regulatory requirements to Social Media tools available to the rest of the business world.

Firms now the option of fully engaging in Social Media, which is rapidly becoming less an option and more a matter of survival.