Regulated industries can be frustrating to work in. They’re generally run by MBAs, but ultimately controlled by the lawyers. However, without such regulations, the opportunity and motivation for engaging in nefarious and fraudulent activity would be higher than it already is. Part of the issue involved in social media is that it converts normal two party client-advertiser conversations into multi-party interactive dialogue. In the investment world this can pose issues for a few reasons, the biggest of which is the controllable nature of the content and the message. With that in mind, here are a few specific difficulties the investment community may face in using social media as a communication device.
Third Party Linking and Data Feeds
Because any qualified investment bank or registered broker dealer needs to wholly and accurately represent information, that also includes links to third party websites, including partners and data feeds. In some instances, it can be difficult to police. For those linking to third party sites
These issues are less stringent when the entity isn’t regularly selling securities and/or is simply acting as a private M&A advisor to companies looking to sell their businesses.
Maintaining Activity Records
Registered investment advisors, even those supporting some of the most unique investment products, are required to keep a complete record of all past communication with customers, the public and employees. Similar to any internal and external communications like email, social media communication including Twitter, Facebook and SalesForce.com feeds are also relevant. This includes SalesForce’s Chatter.com, even if only used for internal communication.
Supervising Associated Persons
Achieving compliance with securities laws means supervising registered persons and associated persons to ensure the conversations in which they are involved are well within the rules. Registered principals may approve social media sites such as Twitter, Facebook and Linkedin. Reviewing a site prior to approval just ensures that whatever is currently posted on the site does not conflict with the rules outlined by FINRA. In addition, any further updates done to a website or social media account will need to be regularly reveiwed by a supervising registered person.
Be Careful of Suitability and Recommendations
Any personal recommendations on securities can constitute a general recommendation if a representative is not entirely careful. For instance, if you suddenly tweet out a public message to every single one of your 5,000 twitter followers, then the message sent must be suitable for every single person that is following you.
The messages and ideas sent through social media can require a bit more scrutiny in the financial world as the things you say actually matter. It’s easy to stay above board by not saying anything, but that’s not how the world works. Join the conversation, but just do it within the rules.